Which of the following is true of target costing?
A) the target cost is the target price minus the target operating income per unit
B) the target cost includes all past costs to produce the product
C) input from suppliers and distributors are not relevant.
D) a key goal is to minimize value added activities of a product.

Question

Quizplus · Accepted Answer

Target costing involves setting a target cost by subtracting the desired target operating income per unit from the target selling price. The target cost does not include past costs but looks at future costs that can be controlled by the company. Input from suppliers and distributors are relevant in determining the target cost. The goal of target costing is to minimize costs while delivering customer value, not to minimize value-added activities.

Which of the Following Is True of Target Costing