Target costing

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dastageer (Querist)
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19 September 2015 two identical company A and B manufacturer and sale an identical product with same cost structure. the selling price 10pu and variable cost 6pu same in both the cases. the maximum capacity is 25000 units in both companies and fixed overhead for both A and B are 35000. both companies aiming at year-end profit of 15000. the year almost coming to a close. company A has already sold 10000 units and can make and sold additional 15000 units while company B has already sold 20000 units fortunately at their juncture company C wants 5000 units of the same product. it invites competitive quotation from company A and B . both companies are Keen to get the order from company C. which company can get a chance of getting offer in your opinion.. Respected sir/Madam I am foreseeing your reply

Amol S Joglekar

Amol S Joglekar (Expert)
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19 September 2015 Since both the companies are aiming at year end profit of 15,000, B companies' target is already achieved. A company is short by 10,000 in its profit target and hence desparate in getting the offer.

The COMPETITION in the market will, thus play the decisive role, in this regard.

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