Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA PM Exams › Increase in selling price to reduce or close target cost gap
- This topic has 0 replies, 1 voice, and was last updated 4 years ago by yorkey.
- AuthorPosts
- October 2, 2020 at 9:38 am #587081
Dear Sir, Could you please explain why is that a change in selling price won’t reflect the target cost gap?
as an example of it see the revision kit part below:
Question asks which of the following represents a possible method for closing the target cost gap for the webcam?
– Increase its selling price
– Employ more specialist staff in its production
– Redesign the webcam
– Increase the number of bespoke componentsand the answer is:
Redesign the webcam
Changes to selling price will have no effect upon target cost. The remaining options (employ more specialist
staff; increase the number of bespoke components) would serve to increase the target cost gap rather than
decrease it. If a product cannot be made within the target cost, so that a cost gap exists, the targets must be
reduced, or the product redesigned.Could you please explain why change in SP of lets say $40 to 30$ won’t have an effect on target cost gap?
- AuthorPosts
- You must be logged in to reply to this topic.