Which of the following formulas best reflects target costing?
A)Target cost = Firm-determined price less desired profit.
B)Target cost = Market-determined price less desired profit.
C)Target cost = Firm-determined price less desired revenue.
D)Target cost = Market-determined price less desired revenue.
E)Target cost = Firm-determined price less market-determined price.

Question

Quizplus · Accepted Answer

Target costing is a method for determining the maximum cost that can be incurred on a product, given the anticipated selling price and required profit margin. The formula that best reflects target costing is Target cost = Market-determined price less desired profit, as it uses the market price as a starting point and then deducts the desired profit margin to arrive at the maximum allowable cost.

Which of the Following Formulas Best Reflects Target Costing