Target Costs Equal the Difference Between the Target Selling Price

question 14

True/False

Target costs equal the difference between the target selling price and the desired profit margin.

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Definitions:

Terms 4/15, N/60

A commercial credit term indicating that a 4% discount is available if paid within 15 days, with the net (full) amount due within 60 days.

Discount Lost

The expense incurred when a company fails to take advantage of the early payment discounts offered by suppliers.

Gross Method

An accounting method for recording purchases at the invoice's gross amount before any trade discounts are subtracted.

Net Method

A way to record purchases of inventory with a discount for early payment, where the purchase is recorded at the net of the discount and the discount is lost if not taken.