CAF-5 · Chapter 12 · Question 3 of 10
A company plans to sell a new product (NP8) at a target sales price of Rs. 70 per unit. The company requires a minimum gross profit margin of 30%. What is the target cost for this product?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: A) Rs. 49
Explanation
Target Cost = Sales Price – Minimum Gross Profit Margin. Gross Profit = 30% of Rs. 70 = Rs. 21. Target Cost = Rs. 70 – Rs. 21 = Rs. 49.
More Target Costing MCQs
- Q5When estimating the total expected cost of a product to compare against the target cost, which of the following costs should be included?
- Q6A company is evaluating its existing cost structure against its target cost. The current total expected cost of the product is Rs. 91,000…
- Q7In calculating the total expected cost for target costing purposes, how should estimated "rework costs" and expected "warranty costs" be…
- Q8A business is launching a new digital game. The target profit margin is set at 30% of the target selling price. The target selling price…
- Q9What is the primary objective of identifying a Target Cost Gap during the product development phase?