Which of the following is calculated by taking the selling price of the buyer’s end product and subtracting the required profit?
A . Total cost
B . Target cost
C . Allowable cost
D . Should cost
Answer: B
Explanation:
Target cost is determined by subtracting the required profit margin from the selling price of the end product. This calculation helps in setting a cost benchmark that guides the firm’s production and pricing strategies, ensuring profitability while meeting market price points.
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