CAF-5 · Chapter 12 · Question 2 of 10
Which of the following best defines the "Target Cost Gap"?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: B) The difference between the expected cost per unit and the target cost per unit.
Explanation
The target cost gap is defined as the difference between the currently expected cost per unit (what it will cost to make the product under current conditions) and the target cost per unit (what it must cost to achieve the target profit).
More Target Costing MCQs
- Q4Continuing from the previous scenario, if the company calculates that the expected full cost per unit of product NP8 will be Rs. 55, what…
- 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…