A company is considering launching a new product and will use target costing to arrive at the target cost for the product. Target selling price is N$5O with the required profit margin of 40%.The company has annual capacity for orders of 20 000 units with total fixed cost of N$240 000 per year. Labour time required to make one unit is 20 minutes at a cost of N$18 per hour. The material required per unit is 500g per unit at N$30 per kilogram
a) Highlight the five main steps (in order) involved in deriving a target cost
b)Determine the cost gap per unit
c)Explain any three (3) general ways to reduce a cost gap
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