Melborne Corporation manufactures a single product that has a cost of $350. The company uses a 70% markup on cost to arrive at a selling price of $595, which results in a price that virtually always exceeds that of the market leaders. If Mohawk changes to the approach known as target costing, the company will first undertake a thorough study of competitors' prices.

Question

Quizplus · Accepted Answer

Target costing involves determining a target selling price based on competitors' prices and consumer demand, and then working backward to determine the maximum cost that can be incurred in producing the product. Therefore, before implementing target costing, Melborne Corporation would need to study competitors' prices.

Melborne Corporation Manufactures a Single Product That Has a Cost