Target Costing Quiz

If the target selling price is RM120 and the target profit margin is a 40 per cent mark-up on cost, what is the target cost?

• RM48

• RM72

• RM85.7

• RM34.3

Orwell is about to introduce a new product and has established a target cost of RM144 and a target margin on sales of 40 per cent. What is the target price?

• RM2

• RM225

• RM240

• RM280

Cartel Ltd has introduced a new product with a target price of RM240 and a profit requirement of 33.3 per cent on sales. What is the target cost?

• RM120

• RM160

• RM180

• RM200

Beaufort Ltd is introducing a new product. It has established that the target selling prices of the product is RM120. Beaufort requires a profit mark-up on cost of 33.3 per cent for its product. Determine what is the percentage of the target cost on the target selling price for the product.

• 50%

• 60%

• 66.7%

• 75%

The following four tasks take place in the concept known as target costing.

i.Value engineering

ii. Establish a target price

iii. Establish a target cost

iv. Establish a target profit

Which of the following correctly depicts the sequence of these tasks?

• iii, i, iv and ii

• ii, iv, iii and i

• ii, iii, i and iv

• iii, ii, i and iv

Which of the following statements is consistent with target costing?

• It does not consider market share or sales volume.

• Market prices are used to determine product costs.

• Product design has little or no regard for the long-run manufacturing costs.

• It is described as a reactive costing strategy, rather than a proactive costing strategy.

Which of the following are key features of target costing?

i. Cross functionality

ii. Market price driven

iii. Focus on customer value

iv. Based on life cycle management

• i, ii and iii

• i, iii and iv

• i, ii and iv

• All of the given answers

Which of the following time drivers contribute to non-value-added activities?

i. Poor quality

ii. Efficient inventory management

iii. Bottlenecks in production

iv. Poorly structured delivery processes

• i, ii and iii

• i, iii and iv

• i, ii and iv

• All of the given answers

5. Which of the following formulas represents the mark-up percentage on full cost?

• Mark-up % = target profit / Total cost

• Mark-up % = target profit × total cost per unit

• Mark-up % = target profit × annual volume

• Mark-up % = target profit / Total production cost

Which of the following represents the cost-based pricing formula?

• Price = cost + (mark-up % × cost)

• Price = cost + mark-up %

• Price = mark-up % × cost

• Price = cost + (mark-up % + cost)