The difference between the supplier's price and the target cost becomes the strategic cost-reduction objective.

Question

Quizplus · Accepted Answer

This statement is true. The difference between the supplier's price and the target cost represents the amount of cost reduction that the company needs to achieve in order to meet its profit margins or price targets. Thus, it becomes a strategic objective for the company to reduce costs by that amount through various means such as process improvements, negotiation with suppliers, or sourcing cheaper materials.

The Difference Between the Supplier's Price and the Target Cost