Question

Charter Corporation manufactures a single product that has a cost of $350. The company uses a 70% markup on cost to arrive at a selling price of $595, which results in a price that virtually always exceeds that of the market leaders. If Charter changes to the approach known as target costing, the company will first: undertake a thorough study of competitors' prices. change the markup so that it is based on sales rather than based on cost. attempt to re-engineer its product. trim its $350 cost. reduce its 70% markup rate.

Answer 1

Answer:

trim its $350 cost.

Explanation:

Target costing starts in the final selling of a good and then the company deducts its desired markup. The result is the target cost of the product. The company then tries to cut production costs in order to reach that target cost.

E.g. the market price is $500

target cost = $500 / 1.7 = $294.12

the company will try to manufacture its product spending just $294.12 per unit