When a firm determines the desired cost for a product or service, given a competitive market price, in order to earn a desired profit, the firm is exercising:
A) Target costing.
B) Life cycle costing.
C) Variable costing.
D) Absorption costing.
E) Competitive costing.

Question

Quizplus · Accepted Answer

Target costing involves determining the desired cost for a product or service based on a competitive market price and a desired profit margin. It is commonly used in industries with high levels of competition where firms must be efficient in cost management to remain competitive. Life cycle costing, variable costing, absorption costing, and competitive costing are not relevant to the definition provided in the question.

When a Firm Determines the Desired Cost for a Product