Which of the following statements is consistent with target costing?
A) It does not consider market share or sales volume.
B) Market prices are used to determine product costs.
C) Product design has little or no regard for the long-run manufacturing costs.
D) It is described as a reactive costing strategy, rather than a proactive costing strategy.

Question

Quizplus · Accepted Answer

Target costing starts with determining the desired selling price in the market and then targets a cost that will allow the company to earn a desired profit margin. Market prices are used to determine the target cost, which is then used to guide product design and manufacturing processes. Option A is incorrect because market share and sales volume are important considerations in target costing. Option C is incorrect because product design should take into account long-run manufacturing costs to ensure that the target cost is met. Option D is incorrect because target costing is a proactive costing strategy that aims to achieve desired profit margins by planning and controlling costs during the product design and manufacturing stages.

Which of the Following Statements Is Consistent with Target Costing