Limited sells a product that has a current market price of N$100. The market price to penetrate in the market would be N$90 and Jo Limited wants to earn profit margin of 20% on sales.

Question 4 (12

marks)

Only write the letter that represent the answer. E.g. 7.0 A, failure to follow will result in the answer

being marked wrong.

4.1 Jo Limited sells a product that has a current market price of N$100. The market price to

penetrate in the market would be N$90 and Jo Limited wants to earn profit margin of 20% on

sales.

The target cost for Jo Limited will be;

A. $ 80.00

B. $ 75.60

C. $ 72.00

D. $ 84.00

4.2 ……..is a cost estimate derived by subtracting a desired profit margin from a competitive

market price.

A. marginal cost

B. unit cost

C. target cost

D. none of the choices

4.3

1. The required profit margin is deducted from the anticipated selling price to arrive at the target

product cost in manufacturing and service industries.

2. The main focus of target costing is not finding what a new product does cost but what it should

or needs to cost.

A. statement 1 is false

B. both statements are false

C. both statements are true

D. statement 2 is false

4.4 The following are considered in deriving a Target Cost, except;

A. Doing market research and competitor’s analysis.

B. Specifying a product

C. The price at which it could be sold

D. The method of costing the product

4.5 Which of the following techniques is NOT relevant to target costing?

A. Value analysis

B. Variance analysis

C. Functional analysis

D. Activity analysis

4.64.6 The following are all steps in the implementation of the target costing process for a product:

i) Calculate the target cost

ii) Calculate the estimated current cost based on the existing product specification

iii) Set the required profit

iv) Set the selling price

v) Calculate the target cost gap

Which of the following represents the sequence if target costing were to be used?

A. i, ii, ii , iv, v

B. ii, iii, iv, i, v

C. iv, iii, i, ii, v

D. iv, v, iii, i, ii

 

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