When microwave ovens were being developed in the 1980s,they represented such a radical concept that the company was unsure about pricing.Early prototypes were large,cumbersome and would need a price tag of thousands of dollars simply to breakeven.With remarkable insight,a new divisional manager took over the project and issued the development team with a very clear design brief.The new microwave was to be shaped like an air-conditioner,should look like an oven,have buttons like an oven and be priced around the same as a conventional oven (at the time around $500).The company would not commercialise until the development team could design a microwave at this price.This is an example of which type of costing?
A)variable costing
B)cost-plus
C)target costing
D)standard mark up
E)None of the above.

Question

Quizplus · Accepted Answer

This scenario describes the use of target costing. The company set a target price and instructed the development team to design a product that could be manufactured at this price. This approach focuses on designing products that meet customer needs while also meeting desired profit margins.

When Microwave Ovens Were Being Developed in the 1980s,they Represented