[barelystayingsane]

Can anyone explain why the answer is b?

Several surveys point out that most managers use full product costs, including unit fixed-costs and unit variable costs, in developing cost-based pricing. Which one of the following is LEAST associated with cost-based pricing?

a. Price justification

b. Target pricing

c. Fixed-cost recovery

d. Price stability

So I understand that target costing is used when you have a competitor who is also a cost leader setting prices and you back into your target cost using the market price and a desired profit margin. In Becker, Olinto said that you then use the target cost for target pricing. Wouldn’t that be a form of cost-based pricing (i.e., setting your target price based on your computed target cost)?

[barelystayingsane]

Bump

[Jennifer241]

Target pricing has to do with your competitors pricing, instead of your own product costs.

The other three pricing methods all have to do with your own inner costs associated with the product, rather than a competitor's pricing strategy. Therefore it has little to do with cost-based pricing.

AUD - Jan 9,13 Pass
REG - Aug 30,13 Pass
BEC - Oct 26,13 Pass
FAR - Dec 4,13 Pass

Licensed CPA in the state of Oregon

[Author]

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