Target costing starts with:
A)the selling price of an organization's end product minus the operating profit to establish the target cost.
B)the supplier's price,and works to determine the selling price of the buying organization's end product or service.
C)the supplier's price,and works to determine the supplier's true cost structure.
D)the buyer's lowest reasonable price target,and works to a negotiated price agreed on by the buyer and the supplier.
E)the selling price of an organization's end product minus actual manufacturing,overhead,and materials costs to determine operating profit.

Question

Quizplus · Accepted Answer

Target costing is a method of cost management that starts by determining the target cost of a product based on the selling price minus desired profit margin. In other words, it sets the maximum cost that can be incurred in order to achieve the desired profit margin. This approach is different from the traditional cost-plus pricing method, which starts with cost and adds a desired profit margin to determine price.

Target Costing Starts With