If your goal in an organization was to ensure that sales rev

If your goal in an organization was to ensure that sales revenue is maintained at a minimum 50% more than the product cost at a the unit level, what product costing method would you be more incline to propose and why?

Solution

As the goal is to ensure that the costs are atleast 50% less than the sales revenue. The recommended costing method would be Target costing.

Target costing: Target costing can be defined as a method of costing wherein a target cost for products are set and achieved based on a particular target.

In the above scenario, the target cost is 50% less than sales revenue.

Below is the process of target costing: