Which of the Following Statements Is Typically Not True About

question 40

Multiple Choice

Which of the following statements is typically not true about target costing?

• A) Target costing focuses on the price the customer will be willing to pay for a product or service
• B) After removing a reasonable profit from the price, the target cost is identified
• C) Calculation of the target cost enables designers to focus on meeting the needs of the customer within the target cost constraint
• D) Supply professionals can apply target costing to analyses of supplier's products and services
• E) Target costing requires ABC

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Definitions:

Profit Margin

A financial ratio used to assess a company's profitability by dividing net income by revenue, demonstrating the percentage of revenue that constitutes profit.

Income From Operations

The income earned from a company's everyday core business operations, excluding income from investments and other non-operational sources.

Invested Assets

Assets that are purchased or acquired for long-term income potential or to benefit the business operations.

Investment Turnover

A measure of the efficiency with which a company uses its assets to generate sales or revenue, calculated as sales divided by invested assets.