Which of the Following Is True of Target Costing

question 42

Multiple Choice

Which of the following is true of target costing?

• A) the target cost is the target price minus the target operating income per unit
• B) the target cost includes all past costs to produce the product
• C) input from suppliers and distributors are not relevant.
• D) a key goal is to minimize value added activities of a product.

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Definitions:

Predetermined Overhead Rate

An estimated charging rate used to apply manufacturing overhead costs to produced units, based on a selected activity base.

Predetermined Overhead Rate

A predetermined rate employed to allocate estimated manufacturing overhead costs to products, calculated before the period starts, using projected costs and activity levels.

Direct Labour Hour

A measure of labor that directly contributes to the production of goods, used in calculating labor costs and efficiency.

Manufacturing Overhead

All manufacturing costs that are not directly associated with the production of a product, including costs related to indirect materials, indirect labor, and other indirect expenses.