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Hi sir,
Do we need to include fixed costs while calculating estimated cost for the purpose of finding cost gap in target costing?
I have some clarity issues in this area.
In target costing, fixed costs should be included while calculating the estimated cost for the purpose of finding the cost gap.
The cost gap is determined by subtracting the target cost from the estimated cost. It represents the difference between the desired target cost and the actual estimated cost of production.
Including fixed costs in the calculation ensures that all relevant costs are considered in determining the cost gap.
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