. (TCO 5)  What is the difference between absorption costing and variable costing? (Points : 15)

Question 2. 2. (TCO 6)  What is the first step in the cost allocation process? What is done in this step? (Points : 15)

Question 3. 3. (TCO 7) What is a differential cost?  What is an example of one? (Points : 15)

Question 4. 4. (TCO 8)  What is target costing?  What is the target costing process? (Points : 15)

1. (TCO 6) Name the steps in the ABC approach.  Describe each of them.  Which do you think is the most important step? Why? (Points : 30)

Question 2. 2. (TCO 7) Products Gamma and Delta are joint products. The joint production cost of the products is $800. Gamma has a market value of $500 at the split-off point. If Gamma is further processed at an additional cost of $600, its market value is $1,400. Product Delta has a market value of $1,100 at the split-off point. If Product Delta is further processed at an additional cost of $300, its market value is $1,400.  Using the relative sales value method, calculate the joint product cost that would be allocated to Gamma and Delta.  How do you know if one of the products should be further processed?  (Points : 30)

Question 3. 3. (TCO 8) A company must incur annual fixed costs of $1,000,000 and variable costs of $200 per unit and estimates that it can sell 10,000 pumps annually and marks up cost by 30 percent.  Using cost-plus pricing, what is the cost per unit and the price? What are advantages and disadvantages of cost-plus pricing? (Points : 30)

1. (TCO 9) A project will require an initial investment of $400,000 and will return $100,000 each year for six years. If taxes are ignored and the required rate of return is 9%, what is the project's net present value? Based on this analysis, should the company proceed with the project? (Points : 30)

Question 2. 2. (TCO 10) Why does a company perform ratio analysis?  What are the profitability ratios?  Describe the formula for one profitability ratio and explain how to interpret the ratio?