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Hello Tutor hope you are doing well.. My question relates to one of the MTQ of Target Costing.
Question –Which of the following statement(s) is/are true?
(1) If after calculating a target cost C Co finds that a cost gap exists, it will then be forced to examine its internal processes and costs more closely.
(2) If C Co cannot achieve any reduction in the cost of the cleaning products it uses, it should consider whether it can source cheaper non-chemical products from alternative suppliers.
Tutor my question relates to statement 2. I’m unable to interpret the term “Cheaper non-chemical products”.
Does the term “Cheaper” here means cheaper in terms of cost (i.e. Cheaper Purchase Price) or the term “Cheaper” here means cheaper in terms of quality.
I’m really confused regarding this which has also caused few of my other questions to wrong because of the term “Cheaper”.
Can you please help me out as to from which perspective do we need to interpret the term and why we used the perspective to interpret the term cheaper.
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