The Target Cost Approach Assumes That

question 80

Multiple Choice

The target cost approach assumes that

• A) markup is added to total cost
• B) the selling price is set by the marketplace
• C) markup is added to variable cost
• D) markup is added to product cost

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Definitions:

Variable Cost

Costs that vary directly with the level of production or volume of output.

Fixed Costs

Constant expenses that do not change in relation to the level of production or sales.

Operating Leverage

A measure of how revenue growth translates into growth in operating income, indicating the degree to which a firm can increase its profits by increasing sales.

Fixed Operating Costs

Expenses that do not change with the volume of production, such as salaries and rent.