Which of the following is a disadvantage of using target costing?
A) It may lead to an increase in all the non-value added cost of the product
B) It may lead to a product being in development stage for a long time as the team repeatedly evaluates alternative designs.
C) It may lead to increased employee participation in the cost reduction process of the organization thereby making it impossible to co-ordinate the process.
D) It eliminates creativity in the manufacturing process as the focus is always on cost reduction and cost elimination.

Question

Quizplus · Accepted Answer

Target costing involves setting a target cost for a product and then designing the product to meet that cost. This can lead to a product being in development for a long time as the team repeatedly evaluates alternative designs to meet the target cost. This can cause delays in getting the product to market and can increase development costs. However, none of the other options listed are disadvantages of target costing. Option A is incorrect as target costing is designed to reduce non-value-added costs. Option C is incorrect as increased employee participation in the cost reduction process is a benefit of target costing. Option D is incorrect as target costing does not eliminate creativity in the manufacturing process but rather seeks to find ways to achieve cost reductions while maintaining product quality and functionality.

Which of the Following Is a Disadvantage of Using Target