A target cost is
A)the standard cost.
B)the difference between the sales price needed to capture a predetermined market share and the desired per-unit profit.
C)the long-run average cost over the life cycle of the product.
D)none of the above.

Question

Quizplus · Accepted Answer

A target cost is the difference between the sales price needed to capture a predetermined market share and the desired per-unit profit. In other words, it is the cost that a company should aim for in order to achieve a desired profit margin while remaining competitive in the market. A target cost is not the same as the standard cost, which is the cost that is expected to be incurred in the production of each unit of product, nor is it the long-run average cost over the life cycle of the product.

A Target Cost Is