Which Equation Better Describes Target Costing

question 50

Multiple Choice

Which equation better describes target costing?

• A)Selling Price - Desired Profit = Target Costs
• B)Selling Price + Desired Profit = Target Costs
• C)Total Costs - Desired Profit = Target Costs
• D)Target Variable Cost + Desired Costs = Target costs

---

Definitions:

Job Order Cost System

A job order cost system is an accounting method that tracks costs and revenues by specific jobs and assigns costs to products based on the jobs.

Job Order Costing System

An accounting system used to accumulate costs associated with a specific batch or order of production, suitable for businesses producing custom or unique products.

Service Firms

Companies that provide intangible products or services to customers, rather than physical goods.

Predetermined Overhead Rate

An estimated charge per unit of activity used to allocate manufacturing overhead costs to products or job orders, based on a set formula.