Answer (D) is correct.
Target pricing and costing may result in a competitive advantage because it is a customeroriented
approach that focuses on what products can be sold at what prices. It is also
advantageous because it emphasizes control of costs prior to their being locked in during
the early links in the value chain. The company sets a target price for a potential product
reflecting what it believes consumers will pay and competitors will do. After subtracting
the desired profit margin, the long-run target cost is known. If current costs are too high to
allow an acceptable profit, cost-cutting measures are implemented or the product is
abandoned. The assumption is that the target price is a constraint.