A Major Advantage of the Target Costing Approach to Pricing

question 106

Multiple Choice

A major advantage of the target costing approach to pricing is that target costing

• A)allows a company to analyze the potential profit of a product before spending money to produce the product.
• B)is not dependent on customers' quality-versus-price decisions.
• C)identifies unproductive assets.
• D)anticipates the product's profitability midway through its life cycle.

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Definitions:

Resource

An economic or productive factor required to accomplish an activity, or to provide a benefit to the economy, such as raw materials, labor, and capital.

High Demand

A situation in which the desire for a product or service exceeds the available supply, often leading to higher prices.

Low Demand

A situation where the desire or need for a particular product or service is less than the supply available.

Pure Competition

A market structure characterized by a large number of small firms, a homogeneous product, and very easy entry and exit from the market.