Target cost is computed by:
A)adding desired profit and expected selling price.
B)subtracting desired profit from expected selling price.
C)subtracting net income from expected selling price.
D)adding net income and expected selling price.

Question

Quizplus · Accepted Answer

Target cost is the expected cost of a product that will enable the company to achieve its desired profit when the product is sold at its expected selling price. Therefore, the target cost is computed by subtracting the desired profit from the expected selling price. The formula for calculating the target cost is as follows: Target Cost = Expected Selling Price - Desired Profit.

Target Cost Is Computed By