ACCA PM · Chapter 3 · Question 3 of 9
What is the starting point in the target costing process?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: B) Setting a selling price that customers are expected to accept
Explanation
Target costing is market-led: it starts with the price customers will pay, deducts the required profit to give the target cost, and then compares this with the estimated cost to find the cost gap. Cost-plus pricing starts with cost, which is the opposite approach.
More Target costing and life-cycle costing MCQs
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- Q7At which stage of a product's life are the majority of its life-cycle costs committed (locked in)?
- Q8Which of the following is a benefit of life-cycle costing compared with traditional period-based cost reporting?
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