Target Costing Determines the Desired Cost for a Product Upon

question 58

Multiple Choice

Target costing determines the desired cost for a product upon the basis of a given competitive price such that the product will:

• A) Earn at least a small profit.
• B) Earn a desired profit.
• C) Earn the maximum profit.
• D) Break even.
• E) Sell the highest volume.

Understand the concept of spending variance and how to calculate it for different categories (manufacturing overhead, refurbishing materials, other expenses, equipment depreciation, supplies costs, occupancy costs, employee salaries and wages, facility expenses, travel expenses, power cost, and medical supplies).

Identify and calculate the revenue variance for different months.

Calculate and analyze the variance for net operating income comparing actual results to the flexible budget for various months.

Understand the difference between favorable and unfavorable variances and their implications on budget performance.

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Definitions:

Fallacy

A reasoning error that causes an argument to be invalid.

Examples

Instances or cases that are representative of a concept, principle, or condition, used to illustrate or clarify.

Generalize

To make a general statement or concept by inferring from specific cases.

Sufficient

Adequate to achieve a goal or meet a requirement without the need for more.