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Accounting

27th Edition
WARREN + 5 others
ISBN: 9781337272094

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BuyFindarrow_forward

Accounting

27th Edition
WARREN + 5 others
ISBN: 9781337272094
Textbook Problem

Target costing

Toyota Motor Corporation uses target costing. Assume that Toyota marketing personnel estimate that the competitive selling price for the Camry in the upcoming model year will need to be $27,000. Assume further that the Camry's total unit cost for the upcoming model year is estimated to be $22,500 and that Toyota requires a 20% profit margin on selling price (which is equivalent to a 25% markup on total cost).

a. What price will Toyota establish for the Camry for the upcoming model year?

b. What impact will target costing have on Toyota, given the assumed information?

a)

To determine

Product pricing: Product pricing is the method used for fixing the price for the products sold or the services offered to the consumers.

Target cost concept:   Target cost is the estimated cost of the product which is calculated on the basis of sustainable price in the marketplace.

 Target Cost = Expected Selling Price – Desired Profit

To Determine: The price of the Camry for the upcoming model year.

Explanation

Target cost concept:   Target cost is the estimated, on the basis of sustainable price in the marketplace...

b)

To determine
The impact of target costing on the Company TMC, on the basis of the given data.

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