Which equation better describes Target Costing?
A) Selling Price - Desired Profit = Target Costs
B) Selling Price + Profit = Target Costs
C) Target Variable Costs + Contribution Margin = Selling Price
D) Selling Price = Profit - Target Variable Costs

Question

Quizplus · Accepted Answer

Target Costing is a method of cost accounting used to manage costs during the product design and development phase. It involves determining the maximum cost that can be incurred to produce and sell a product at a certain price while achieving a desired profit. This is calculated as Selling Price minus Desired Profit equals Target Costs, which is represented by equation A.

Which Equation Better Describes Target Costing