Which of the Following Is True of Target Costing

question 121

Multiple Choice

Which of the following is true of target costing?

• A) In target costing, all future costs are considered for long-run pricing.
• B) In target costing, cost is the starting point for determining the price of the product.
• C) In target costing, input from suppliers and distributors are not relevant.
• D) In target costing, a key goal is to minimize value added activities of a product.

---

Definitions:

Operating Activities Section

A part of a company's cash flow statement that shows the cash flow from its core business operations.

Direct Method

A method of computing the net cash provided by operating activities in which the income statement is reconstructed on a cash basis from top to bottom.

Indirect Method

A method of computing the net cash provided by operating activities that starts with net income and adjusts it to a cash basis. It is also known as the reconciliation method.

Inventory

Raw materials, work-in-process, and finished goods that a company holds with the intent to sell or use in production.