The Formula for Target Cost Is

question 47

True/False

The formula for target cost is:
Target cost = Anticipated selling price + Desired profit

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Definitions:

Annual Operating Income

The profit earned from a firm's normal core business operations, excluding deductions of taxes and interest charges.

Average Rate of Return

A financial metric used to estimate the profitability of an investment, calculated by dividing the average annual profit by the initial investment cost.

Internal Rate of Return

The discount rate that makes the net present value (NPV) of all cash flows from an investment equal to zero.

Net Present Value

A financial metric that calculates the difference between the present value of cash inflows and outflows over a period of time.