ExpertEasy2 marksShort Answer
ACCA · Question 17 · Target Costing
Section B - Case 1: AeroYield
AeroYield is a technology startup developing specialized drones for the agriculture sector to monitor crop health. The company is preparing to launch its new model, the 'AgriScout'. Market research indicates that customers are willing to pay $8,000 for the AgriScout. AeroYield's investors require a profit margin of 25% on the selling price.
The current estimated production cost for the AgriScout is $6,400 per unit.
Calculate the target cost gap for the AgriScout drone. (Enter the number only).
Section B - Case 1: AeroYield
AeroYield is a technology startup developing specialized drones for the agriculture sector to monitor crop health. The company is preparing to launch its new model, the 'AgriScout'. Market research indicates that customers are willing to pay $8,000 for the AgriScout. AeroYield's investors require a profit margin of 25% on the selling price.
The current estimated production cost for the AgriScout is $6,400 per unit.
Calculate the target cost gap for the AgriScout drone. (Enter the number only).
How to approach this question
Target Cost Gap = Current Estimated Cost - Target Cost. (Target cost was calculated as $6,000).
Full Answer
Target Cost (from previous calculation) = $6,000.
Current Estimated Cost = $6,400.
Target Cost Gap = Current Estimated Cost - Target Cost = $6,400 - $6,000 = $400.
Common mistakes
Subtracting the target cost from the selling price instead of the estimated cost.
Practice the full ACCA PM — Performance Management Practice Exam 1
32 questions · hints · full answers · grading
More questions from this exam
Q1Section A
OmniRetail, a global supermarket chain, is implementing a new Executive Information Sy...EasyQ2Section A
CloudTech Solutions, a SaaS provider, is migrating its core financial performance data...MediumQ3Section A
ArtisanWood crafts bespoke furniture. The company is adopting Activity-Based Costing (...EasyQ4Section A
SiliconForge manufactures semiconductor chips. The factory has a bottleneck process. T...MediumQ5Section A
ChemCorp produces industrial solvents. Recently, the company was fined $50,000 by the ...Easy