CMA Final · Strategic Cost Management · Target Costing
Kaveri Appliances plans to launch a mixer-grinder. Market research shows customers will pay Rs 3,600 per unit. The company requires a target profit margin of 20% on selling price. What is the target cost per unit?
The target cost is Rs 2,880. Under target costing, cost equals market price minus required profit. With a 20% margin on a Rs 3,600 price, profit is Rs 720, leaving Rs 2,880 as the allowable cost per unit.
- ARs 2,880Correct
- BRs 3,000
- CRs 2,700
- DRs 720
Explanation
Target profit = 20% of 3,600 = Rs 720. Target cost = Selling price - target profit = 3,600 - 720 = Rs 2,880. Rs 3,000 wrongly computes 3,600/1.20 (margin on cost). Rs 720 is only the profit.
Did you get it right without looking?
One question tells you little. A timed set on Target Costing shows your real accuracy, how long you take and where you lose marks.
More Target Costing questions
- Ananya Appliances plans to launch a mixer-grinder. Market research shows customers will pay Rs 4,000 per unit, and the company requires a ta…
- Rohan Electronics has a target cost of Rs 2,000 per unit for a speaker. Functions and their customer-assessed importance and current cost ar…
- A firm's target cost for a product is Rs 800 per unit. Current cost is Rs 900. Value engineering identifies a saving of Rs 60 per unit. Kaiz…
- Rohan Foods targets a total cost of Rs 500 per unit for a product with four functions. Function weights by customers: Taste 40%, Pack 30%, S…
- Ananya Appliances plans to launch a mixer-grinder. Market research shows customers will accept a selling price of Rs 4,000 per unit. The com…
- Kaveri Appliances expects to sell a mixer-grinder at a market price of Rs 4,000 per unit. The company requires a profit margin of 20% on sel…