How do managers obtain the target cost for a new product under consideration? Assume the market price per unit is known and it cannot be influenced by management.
A) the sum of all production and nonproduction costs
B) the sum of all production costs
C) price per unit minus gross profit per unit
D) the sum of all variable costs

Question

Quizplus · Accepted Answer

The target cost is calculated by subtracting the desired profit margin (gross profit per unit) from the market price per unit. This means that the target cost is determined as: target cost = market price per unit - gross profit per unit. The production and nonproduction costs (A) and variable costs (D) are important in determining the actual cost of production, but they do not directly determine the target cost for a new product. Therefore, option C is the best choice for obtaining the target cost for a new product under consideration.

How Do Managers Obtain the Target Cost for a New