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Y_Kistochka [10]
3 years ago
15

Alternative A Alternative B Materials costs $28,000 $64,000 Processing costs $34,000 $34,000 Equipment rental $11,000 $28,500 Oc

cupancy costs $19,500 $27,600 What is the differential cost of Alternative B over Alternative A, including all of the relevant costs?
Business
1 answer:
stira [4]3 years ago
6 0

Answer:

$61,600

Explanation:

The differential cost analysis is an analysis in which the costs of two alternatives is taken into consideration and based on those costs it is decided that which alternative is suitable in terms of increment that has been lost by other alternative. That is why it is also known as alternative cost. To calculate the differential cost, it is simple, subtract the cost of 1st alternative from the 2nd and you will get the differential cost. Basically this tool helps in decision making when deciding to choose between two alternatives.

In the question we have been asked to find the differential cost of Alternative B over Alternative A, including all of the relevant costs. To do that first we need to find the differential costs among all the relevant costs and then sum all the differences to find the differential cost of Alternative B over Alternative A.

(a)

Differential Cost of Alternative B over Alternative A is;

Materials costs =  $64,000 - $28,000 = $36,000

Processing costs =  $34,000 - $34,000 = $0

Equipment rental =  $28,500 - $11,000 = $17,500

Occupancy costs = $27,600 - $19,500 = $8,100

(b)

Now the Total Cost which is Differential Cost of Alternative B over Alternative A is;

$36,000 + $0 + $17,500 + $8,100

$61,600

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Answer:

Results are below.

Explanation:

Giving the following information:

Company 1:

Beginning inventory Merchandise $253,000

Cost of purchases 600,000

Ending inventory Merchandise 153,000

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<u>To calculate the cost of goods sold, we need to use the following formula:</u>

<u></u>

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COGS= $700,000

<u>Company 2:</u>

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