Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA PM Exams › Target costing
- This topic has 4 replies, 2 voices, and was last updated 6 years ago by John Moffat.
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- March 27, 2018 at 9:31 pm #443940
Dear Sir,
I would be grateful if you could help me to understand the answer of this true/false question.
A target cost is the difference between the target cost for a product and its projected cost. The answer is true and I don’t understand it . May you please help me ?
March 27, 2018 at 9:34 pm #443941Sir , I’ve another question on TC.
Product X targets selling price per unit = $10
Target profit = 25%
Current cost = $8.4 per unit .How is the target cost gap $0.4 ?
I would be grateful if you could help me sir
March 28, 2018 at 6:40 am #443955First question: Either you have misread the question, or there is a typing error in whatever book you found it.
The difference between the target cost and the projected cost is the target cost gap.Second question: I would assume that the question actually says that the target profit is 25% of cost (or that the mark-up is 25%, which automatically means 25% of cost). In which case the target cost is 100/125 x $10 = $8. (25% x $8 = $2, and so the selling price = 8 + 2 = $10).
Therefore the cost gap is 8.40 – 8.00 = $0.40.Both of these points are explained, with examples, in my free lectures on target costing, and I do suggest that you watch them.
The lectures are a complete free course for Paper F5 and cover everything needed to be able to pass the exam well.
March 28, 2018 at 3:37 pm #444032sir, thanks a lot for clarifying this issue for me . You’re the best ! 🙂
March 29, 2018 at 6:53 am #444062You are welcome 🙂
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