Which of the following is true?
A)In most cases, a company sets the price instead of it being set by the competitive market.
B)The difference between the target price and the desired profit is the target cost of the product.
C)In a competitive environment, the company must set a target cost and a target selling price.
D)The target cost is the price the company believes would place it in the most competitive position.

Question

Quizplus · Accepted Answer

The target cost is calculated by subtracting a desired profit margin from the target selling price. This is known as target costing. Option A is incorrect because in many cases, companies do consider the competitive market while setting the price. Option C is incorrect because in a competitive environment, the company must set a target cost based on the desired profit margin and then calculate the target selling price. Option D is incorrect because the target cost doesn't necessarily place the company in the most competitive position, but rather ensures that the product is priced competitively while also generating the desired profit margin.

Which of the Following Is True