Question

Two alternatives, code-named x and y, are under consideration at guyer corporation. costs associated with the alternatives are listed below. alternative x alternative y materials costs $ 45,000 $ 65,300 processing costs $ 49,400 $ 49,400 equipment rental $ 18,400 $ 18,400 occupancy costs $ 17,600 $ 26,100 what is the financial advantage (disadvantage) of alternative y over alternative x?

Answer 1

Answer:

Two alternatives

Costs of alternatives:

The financial disadvantage of alternative y over alternative x is $28,800.

Explanation:

a) Data and Calculations:

Costs of alternatives:

                            alternative x       alternative y

materials costs    $ 45,000             $ 65,300

processing costs $ 49,400             $ 49,400

equipment rental $ 18,400              $ 18,400

occupancy costs  $ 17,600              $ 26,100

Total costs         $ 130,400           $ 159,200

Difference in costs = $28,800

b) The financial disadvantage of alternative y over alternative x is the increased cost incurred with alternative y over alternative x.  While the total cost of alternative x is $130,400, alternative y has a total cost of $159,200, which is $28,800 more than the total costs of alternative x.  The implication is that alternative y costs more than alternative x, making alternative x is a preferred alternative where cost is the determinant of the chosen option.