In Contrast to the Total Product and Variable Cost Concepts

question 28

Multiple Choice

In contrast to the total product and variable cost concepts used in setting selling prices, the target cost approach assumes that:

• A) a markup is added to total cost.
• B) selling price is set by the market price.
• C) a markup is added to variable cost.
• D) a markup is added to product cost.

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Definitions:

Collateral

An asset that a borrower offers to a lender as security for a loan.

Hypothecated

Hypothecated refers to assets that are pledged as collateral for a loan without transferring title or possession to the lender, often used in secured loans.

Loan

A financial agreement in which one party lends money to another, which is then required to repay the amount along with interest over a predetermined period.

Financial Assets

Assets that derive value because they represent a claim on future cash flows or other financial benefits, such as stocks, bonds, or bank deposits.