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In target costing , which of the following would be a legitimate strategy to reduce a cost gap for a product that existed in a competitive industry with demanding shareholders ?
A. Increase the selling price
B. Reduce the expectation gap by reducing selling price
C. Reduce the desired margin on the product
D. Increase productivity in the production processAnswer is D
Can i know why is the answer D? I thought its suppose to be A?Thank you sir
The aim of target costing is to find ways of reducing the cost to the target cost.
The selling price was originally fixed at whatever we think customers could reasonably be expected to pay, and therefore we would not want to increase the selling price (otherwise people would not buy the product).
Increasing productivity (i.e. producing faster) will reduce the unit cost.
Have you watched my free lectures on target costing?
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