Chapter 25, Problem E25.12E

To determine

Target Costing:

Target costing takes a product market price as given and determines the maximum cost that the company can spend to make the product before the product is created or even designed.

We can reduce costs via:

A. Value engineering is a cost-reduction technique, used primarily during design that uses information about a value chain functions that satisfy customer needs while reducing costs.

B. Kaizen costing is the Japanese word for continuous improvement .

Requirement 1:

1. Approach that Jhonson builder should emphasize for pricing.

To determine

Requirement 2:

Whether Jhonson builder will be able to achieve their target profit levels.

To determine

Requirement 3:

Computation of new cost plus pricing.