A difference in cost-plus pricing and target costing is that target costing

Question

Quizplus · Accepted Answer

Target costing starts with the price customers are willing to pay and then determines the maximum allowable cost to ensure a desired profit margin. Cost-plus pricing, on the other hand, starts with the cost and adds a markup to determine the selling price. Option A is incorrect because target costing is determined before introducing a product, while cost-plus pricing is generally used after production. Option B is incorrect because target costing involves a more comprehensive analysis of customer needs and competitor pricing, making it a more complex approach than cost-plus pricing. Option D is incorrect because target costing determines the maximum allowable cost, whereas cost-plus pricing determines the markup to be added to the cost.

A Difference in Cost-Plus Pricing and Target Costing Is That