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target costing

The document discusses various cost concepts related to product pricing, including product cost concept, target costing, and value engineering. It outlines how different approaches, such as cost-plus and total cost concepts, influence pricing strategies and the inclusion of costs in markups. Key terms like functional analysis and the role of market pricing in target costing are also highlighted.

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Lucy Heartfilia
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26 views

target costing

The document discusses various cost concepts related to product pricing, including product cost concept, target costing, and value engineering. It outlines how different approaches, such as cost-plus and total cost concepts, influence pricing strategies and the inclusion of costs in markups. Key terms like functional analysis and the role of market pricing in target costing are also highlighted.

Uploaded by

Lucy Heartfilia
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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1.

What cost concept used in applying the cost-plus approach to


product pricing includes only total manufacturing costs in the "cost"
amount to which the markup is added?

ANSWER: Product cost concept

2. In contrast to the total product and variable cost concepts used in


setting seller's prices, the target cost approach assumes that:

ANSWER: selling price is set by the marketplace

3. Which one of the following is used in target costing to reduce


product cost by analyzing the tradeoffs between (1) different types
and levels of product functionality and (2) total product costs?

ANSWER: value engineering

4. Which one of the following is a common type of value engineering


in which each major functions or feature of the product is examined
in terms of its performance and cost?

ANSWER: Functional Analysis

5. A practical approach which is frequently used by managers when


setting normal long-run prices is the.

ANSWER: cost-plus approach

6. Defense contractors would be more likely to use which of the


following cost concepts in pricing their product?

ANSWER: Total cost


7.What cost concept used in applying the cost-plus approach to
product pricing covers selling expenses, administrative expenses,
and desired profit in the "markup"?

ANSWER: Product cost concept

8. In using the product cost concept of applying the cost-plus


approach to product pricing, what is included in the markup?

ANSWER: Total selling and administrative expenses plus desired


profit

9. When a firm determines the desired cost for a product or service,


given a competitive market price, in order to earn a desired profit,
the firm is exercising:

ANSWER: target costing

10. In using the total cost concept of applying the cost-plus


approach to product pricing, what is included in the markup?

ANSWER: Desired profit

11. In using the variable cost concept of applying the cost-plus


approach to product pricing, what is included in the markup?

ANSWER: Total fixed manufacturing costs, total fixed selling and


administrative expenses, and desired profit

12. What cost concept used in applying the cost-plus approach to


product pricing includes only desired profit in the "markup"?

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