Question

Zurasky Corporation is considering two alternatives: A and B. Costs associated with the alternatives are listed below: Alternative A Alternative B Materials costs $28,000 $64,000 Processing costs $34,000 $34,000 Equipment rental $11,000 $28,500 Occupancy costs $19,500 $27,600 What is the differential cost of Alternative B over Alternative A, including all of the relevant costs?

Answer 1

Answer:

Differential cost of Alternative B over Alternative A=$61,600

Explanation:

Differential Cost:

It is the difference in costs if there are more than one alternatives and one alternative is chosen while rejecting the other alternatives.

In order to calculate the differential cost of Alternative B over Alternative A, including all of the relevant costs we first calculate the total cost of both alternatives and then tae the difference.

Total Of Alternative A=Material Cost+Processing Cost+Equipment Rental+occupancy costs.

Total Of Alternative A=$28000+$34000+$11000+$19500=$92,500

Total Of Alternative B=Material Cost+Processing Cost+Equipment Rental+occupancy costs.

Total Of Alternative B=$64000+$34000+$28500+$27600=$154,100

Differential cost of Alternative B over Alternative A=Total Of Alternative B-Total Of Alternative A

Differential cost of Alternative B over Alternative A=$154,100-$92,500

Differential cost of Alternative B over Alternative A=$61,600