A firm using target costing obtains the allowable cost by subtracting the targeted profit margin from the expected price point.

Question

Quizplus · Accepted Answer

Target costing is a method of cost management that involves determining the maximum cost that can be incurred for a product to ensure it can be sold at a price that is acceptable to customers while still providing the desired profit margin for the company. The allowable cost is calculated by subtracting the targeted profit margin from the expected price point. Therefore, the statement is true.

A Firm Using Target Costing Obtains the Allowable Cost by Subtracting