Part 1: Target Costing a. Why/when would a company use target costing? (1 mark) b. A company currently makes a product for $20, however, they have determined the maximum cost (the target cost) is $15. What could you recommend to them to help reduce their direct material costs? (2 marks) Part 2: Variable vs. Absorption Costing (independent from Part 1) Gator Corporation makes a mechanical stuffed alligator. The following information is available: Expected annual volume in units) 400.000 Per Unit $ $ Direct materials Direct labour Variable manufacturing overhead Variable selling and administrative expenses Fixed manufacturing overhead Fixed selling and administrative expenses Huulus Total 37.00 18.00 15.00 5.00 $ in order to produce the stuffed alligator the company had to purchase equipment and a factory building, In order to produce the stuffed alligator, the company had to purchase equipment and a factory building, among other assets. The company is looking to get a 20% return on this investment in assets. $ Investment in assets (equipment, building other assets) Expected return on investment 20,000,000 20% Calculate the following (1 mark each) a. Desired return on investment (ROI) per unit $ 10.00 b. Fixed Manufacturing Overhead per unit c. Fixed selling and admin per unit + d. Total cost to make one unit (manufacturing cost) c. Fixed selling and admin per unit d. Total cost to make one unit (manufacturing cost) e. Total variable cost per unit f. Use variable costing to determine the markup percentage 8. Use your answer from part f and use variable costing to determine the selling price h. The company was planning to sell the alligator for $80.00. If they go ahead with that selling price, will they be able to get the desired return? h. Explain your answer to (8) above (1 mark)