Question

Which of the following works backward from the desired price to find the allowable cost?

a.Mixed costing

b.Differential costing

c.Target costing

d.Overall costing

e.Step costing

Answer 1

C.TARGET COSTING:-

The fundamental objective of target costing is to manage the business to be profitable in a highly competitive marketplace. In effect, target costing is a proactive cost planning, cost management, and cost reduction practice whereby costs are planned and managed out of a product and business early in the design and development cycle, rather than during the later stages of product development and production.

The objective of Target costing to determine Correct Cost and Manage Business Activities to be Profitable in highly Competitive Marketplace

Target Cost = Target Selling Price -Target Profit

The Target Costing Works in Market Research, to Identify Nature of Market,Customers Requirements,Development of product design and then it works backward from the desired price to find the allowable cost.