Target Cost And Cost Reduction To Achieve Target Cost


Cristal Pty Ltd has decided to use target costing for all new products.

The following data is available for a new product currently under consideration:
Estimated sales volume                                                                                        100,000
Target selling price                                                                                              $190 per unit
Desired profit margin on new product launches                                                      20 percent
Standard product cost for the new product based on current operating conditions     $156 per unit

Which of the following figures show the target cost for the new product and the cost reduction required per unit to achieve the target cost?
          Target cost per unit         Cost reduction per unit
                        $                             $    
A.                  125                             4
B.                  125                           34    
C.                  152                            4
D.                  152                          38


This multiple choice question belongs to Operations Management and the question discusses about the target cost for new product and the cost reduction required to achieve the target cost.

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