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The following statements have been made about target costing:
1) Target costing makes the business look at what competitors are offering at an early stage in the new product development process
2) Cost control is emphasized at the new product design stage so any engineering changes must happen before production starts
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Correct Ans. D) both are correct
I don’t understand how both statements are correct. As for statement 1, target costing makes the business look at competitors to establish target selling price, fine, but that can be in any stage of the product; doesnt necessarily have to be in early stage. As for statement 2, cost control at design stage, etc makes sense but what does this have to do with target costing. Sounds more like life-cycle costing.
Comments plz, John.If you watch the free lecture, I make it clear that target costing usually takes place during the designing of a new product.
The main way in which costs can be reduced is by changing the design before we enter into production.
That is what the main thrust of target costing is all about (and why both answers are correct).
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