CAF-5 · Chapter 12 · Question 1 of 10
How is a "Target Cost" mathematically derived for a product?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: B) Target Sales Price minus Minimum Gross Profit Margin
Explanation
According to the target costing methodology demonstrated in the study text, the target cost is calculated by taking the expected sales price and subtracting the minimum required gross profit margin.
More Target Costing MCQs
- Q3A 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…
- 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…