Question

Nesmith Corporation is considering two alternatives: A and B. Costs associated with the alternatives are listed below: Alternative A Alternative B Materials costs $27,000 $62,000 Processing costs $33,000 $33,000 Equipment rental $10,800 $28,400 Occupancy costs $19,400 $27,400 What is the differential cost of Alternative B over Alternative A, including all of the relevant costs?

Answer 1

Answer:

$60600.

Explanation:

Differential Costs:

Materials costs = $62,000 - $27,000

                          = $35,000

Processing costs = $33,000 - $33,000

                             = $0

Equipment rental =  $28,400 - $10,800

                             = $17,600

Occupancy costs = $27,400 - $19,400

                              = $8,000

Sum of all differential cost = $35,000 + $0 + $17,600 + $8,000

                                            = $60,600

Therefore, the differential cost of Alternative B over Alternative A, including all of the relevant costs is $60600.