In contrast to the total product and variable cost concepts used in setting selling prices, the target cost approach assumes that:
A) a markup is added to total cost.
B) selling price is set by the market price.
C) a markup is added to variable cost.
D) a markup is added to product cost.

Question

Quizplus · Accepted Answer

The target cost approach is based on the market price. It starts with the selling price that the market can bear and then subtracts the desired profit to determine the target cost. This approach contrasts with methods that add a markup to various cost components.

In Contrast to the Total Product and Variable Cost Concepts