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F5 was easy ! 50 marks were a piece of cake. No excuses for well prepared students like us. Only with Opentuition and a revision kit, you could write 70 and 80 marks at ease.
Target Costing concept, deals with a competitive Selling Price at market which drives the whole construction of cost card, in order to obtain a pre-determined desired profit. An estimated cost will probably differ from target cost, and that’s the reason we have to close this gap by the appropriate corrective actions.
For example: Life Cycle Costing concept may give us a full cost of 50,00$ p.u. That’s the DETERMINATION of cost.
Assume desired margin profit is 20%. Then, the selling price must be 60,00$ p.u.
Now, look at Target Costing : Market Price for same products now, is 50,00$ p.u. We can’t charge 60,00$ because of highly elastic demand and competition.
If we want a profit of 20% on full cost, the target cost is 41,67$.
Cost gap is 50-41,67 = 8,33$.For some reasons, we might not reduce any costs, so we have either to charge a lower price or to reduce our desired profit margin.
In any case, Target Costing looks first in suited price for the market, and cost is just a result which derives by calculating your desired profit margin.
Life Cycle Costing, looks first at COSTS, all entire life of product costs, and then is added a desired profit margin which show us the appropriate Selling Price.
A target costing price approach may not ensure that recovery of all costs associated with product is assured.Of course Mr Moffat i know that.
I am worrying about the weightiness of Part D in overall exam marks.F2 Exam was “FAIR” !
It was easy, BUT it hadn’t a range of subjects could be examined.
I think i have passed with ~75 points.Thank you Opentution for the knowledge you provide me absolutely free of charge.
