Question

Target costing is directed toward: Multiple Choice The improvement of existing production processes by eliminating non-value adding activities. The creation and design of products that will provide adequate profits. Identifying the amount by which the costs of existing products must be reduced to achieve a target profit margin. Increasing the activity costs associated with existing products.

Answer 1

Identifying the amount by which the costs of existing products must be reduced to achieve a target profit margin.

Step-by-step explanation:

Target costing refer to an act of setting a target cost by deducting from a competitive market price a desired profit margin. A target cost is the targeted maximum cost that is allowed to be incurred on a product.

The aim of the target costing to ensure that cost is reduced to a desired level determined through the process of target costing.

By implication, the purpose of the target costing is to identify a particular cost of production for a good that will produce the desired profit margin when the good is sold.

Therefore, the correct option form the question is that target costing is directed toward identifying the amount by which the costs of existing products must be reduced to achieve a target profit margin.