Refer to the scenario below to answer the following questions.
Alden Manufacturing produces small kitchen appliances-blenders,hand mixers,and electric skillets-under the brand name First Generation.Alden attempts to target newlyweds and first- time home buyers with this brand.
In considering that most young households have limited financial resources,Alden has attempted to engage in target costing."In doing this," Milt Alden stated,"we have better control over keeping price right in line with customers."
Alden manufactures a three- speed blender,its top seller,and a five- speed blender.The hand mixers are manufactured in two styles-a small handheld mixer with two rotating beaters and a similar style that comes with an optional stand and attached mixing bowl.Alden's temperature- controlled skillets are manufactured in one style with three color options.
"Our product offerings are narrower," Milt Alden added,"but our line workers know each product like the back of their hands.This allows us to produce superior products while holding our prices low."
-Milt Alden uses a target costing strategy.Which of the following is he most likely to do in executing this strategy?
A)start by determining the costs of a new product
B)start with customer- value considerations
C)base his price on competitors' prices
D)use everyday low pricing
E)use a break- even chart to determine pricing

Question

Quizplus · Accepted Answer

In target costing, the focus is on customer value considerations. The company starts by determining the price that the target market is willing to pay for the product, and then works backward to determine the maximum allowable cost for the product. This allows the company to design and manufacture products that meet the target market's needs while keeping costs low enough to achieve the desired profit margins. Therefore, B is the correct answer.

Refer to the Scenario Below to Answer the Following Questions