Target costing begins with determining the cost of the product and then focusing

Question

Target costing begins with determining the cost of the product and then focusing on developing ways to sell the product at a price that will enable the company to achieve its desired profit margin 1 9. True False 2 One of the advantages of target costing is that it specifically considers the probable market price for 0. the product. True False 2 If a company is operating beyond its break-even point, sale of one more unit of product increases 1. the company's profit by the amount of the unit contribution margin.

Explanation / Answer

Target Costing: An approach in which companies set targets for its costs based on the price prevalent in the market and the profit margin they want to earn. Target cost = selling price - profit margin.

in target costing initially the product price will be determined based on marget conditions then company will decide the profit margin the remaining should be the cost of manufacture the company has to set target for production with in that cost.

1. Ans) True

2. Ans) True

Break even point means sales where there is no profit and no loss (Fixed cost = contribution margin)

every unit above break even increase the contribution margin beyond its fixed cost. Therefore contribution margin increases beyond its fixed costs resulting profits

3. Ans) True

Related Questions

Navigate

• Browse (All)
• Browse T
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.