(CMA)In target costing:

Question

Quizplus · Accepted Answer

Target costing is a pricing method where the market price of the product is taken as a given, and the company works backward to determine the maximum cost allowed for the product. The company tries to keep the cost of production within this target cost to earn the desired profit margin. Therefore, option A is the correct answer. Option B and D are incorrect as they limit only the raw material cost, while option C is incorrect as it mentions direct labour and manufacturing overhead, which do not fall under the target cost.

(CMA)In Target Costing