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Which of the following statement about target costing is true?
1. TC is a pull system
2. Target costing will be based on current standard of efficiency
3.TC is a cost control technique.
4. Target costing will focus on continual improvement.– The answer is 1 and 4.
– Could you explain what makes 1 and 4 be the answer (no explanation is given in the kit)
-Why 3 is not the answer?It is a pull system because we calculate the target first and then try and make the actual costs equal or lower than the target.
It needs improvement to meet the target cost.
Cost controlling is variance analysis where we compare the actual costs to the standard/budgeted costs. Target costing is a way of deciding what the cost should be – not of later controlling it.
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