Which of the following is the best definition of target costing?

Which of the following is the best definition of target costing?
A . The net present cost of the purchase or project and all future revenues flowing from it discounted back to the present time.
B. The total of all costs in acquiring goods or services from the inception of the demand for them until their safe and satisfactory delivery at the point required.
C. The cost of a product after analysing its components step by step
D. A product cost estimate derived from a competitive market price.

View Answer

Answer: D

Explanation:

Target costing is an activity aimed at reducing the life-cycle costs of new products, while ensuring quality, reliability, and other consumer requirements by examining all possible ideas for cost reduction at the product planning, research and development and prototyping phases of production. But it is not just a cost reduction technique; it is part of a comprehensive strategic profit management system.

Reference: CIPS study guide page 161

LO 3, AC 3.4