CAF-5 · Chapter 12 · Question 4 of 10
Continuing from the previous scenario, if the company calculates that the expected full cost per unit of product NP8 will be Rs. 55, what is the size of the target cost gap?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: C) Rs. 6
Explanation
The target cost gap is calculated by subtracting the target cost from the expected cost. Expected cost (Rs. 55) – Target cost (Rs. 49) = Target cost gap of Rs. 6.
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