Answer:
Target costing can be applied to components of products as well as the new products as a whole.
Explanation:
Target cost is the maximum cost to develop, produce, and deliver the product or service and earn the desired profit
Target Cost = Selling Price – Profit Margin
Features of target cost
1. The price at which the good and service is sold is determined by market conditions
2. Cost reduction is the difference between current cost and target cost
Advantages if target cost
1. It ensures that a product being created is profitable
2. Due to the fact that the product is developed in line with consumers wants, it increases the sales of the product
Disadvantage of target costing
1. If cost estimate is wrong, it can lead to failure of the venture
