Target Pricing

question 10

Multiple Choice

Target pricing:

• A) starts with the supplier's price, and works to determine the selling price of the buying organization's end product or service.
• B) starts with the selling price of an organization's end product minus the operating profit to establish the target cost.
• C) starts with the selling price of an organization's end product minus actual manufacturing, overhead, and materials costs to determine operating profit.
• D) starts with the supplier's price, and works to determine the supplier's true cost structure.
• E) starts with the buyer's lowest reasonable price target, and works to a negotiated price agreed on by the buyer and the supplier.

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Definitions:

Activity Data

Information regarding the actions or operations within a process, often used in activity-based costing to allocate costs more accurately.

Management

The process of planning, organizing, leading, and controlling resources within an organization to achieve its objectives effectively and efficiently.

Cost Changes

Adjustments in the financial outlays associated with different business activities or over time.

Break-even Point

The level of sales at which total revenues equal total expenses, resulting in no net profit or loss.