Target costing begins with the price the customer is willing to pay and the "backs-into" what the product should cost.

Question

Quizplus · Accepted Answer

This statement accurately reflects the concept of target costing, which is a customer-focused approach to cost management in which the target cost of a product is determined based on the price that customers are willing to pay, rather than on the cost of production or desired profit margin. The objective is to design and produce products that meet customer needs and price expectations while also generating a targeted level of profitability for the company.

Target Costing Begins with the Price the Customer Is Willing