Answer:
b) $17,500
Explanation:
First, the multiple options to the question are as follows
a) $12,500 b) $17,500 c) $19,750 d)$20,425
Solution
The question is to determine which of the costs to be incurred in a door-to-door delivery service is a differential cost per month
The following costs have been given:
1) an additional $12,500 in labor costs per month
2) an additional gas, oil and maintenance to the tune of $5,000
3) Home delivery use of trucks allocated 45% of existing $6,500 fixed vehicle costs.
It should however be noted that, the costs we call differential are only the ones that are particularly attributed to the home delivery market service and as such they will only include variable costs not fixed costs
Therefore, the differential costs = $12,500 for labor + $5,000 for maintenance
= $17,500
