Which Equation Better Describes Target Costing

question 62

Multiple Choice

Which equation better describes Target Costing?

• A) Selling Price - Desired Profit = Target Costs
• B) Selling Price + Profit = Target Costs
• C) Target Variable Costs + Contribution Margin = Selling Price
• D) Selling Price = Profit - Target Variable Costs

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Definitions:

Cost of Goods Sold

The direct costs attributable to the production of the goods sold by a company, including the cost of the materials and labor directly used in creating the good.

Work in Process Inventory

Items of inventory that are in the process of being produced but are not yet finished goods.

Work in Process Inventory

Goods in manufacturing that are partially completed, situated between raw materials and finished products.

Direct Material Cost

The cost of raw materials that can be directly attributed to the goods being produced.