Question

San Juan, Inc. is considering two alternatives: A and B. The costs associated with the alternatives are listed below: Alternative A Alternative B Material costs $ 38,000 $ 66,000 Processing costs 43,000 66,000 Building costs 13,700 36,000 Equipment rental 20,700 20,700 If only the differential costs of the two decisions are considered, the total differential costs of Alternative B is

Answer 1

Answer:

Total differential cost= -$73300

Explanation:

Equipment rental is equal in both alternatives, so it is not relevant for making a decision.

Costs Alternative A:

Material costs $ 38,000

Processing costs 43,000

Building costs 13,700

Total= $94700

Costs Alternative B:

Material costs $ 66,000

Processing costs $66,00

Building costs $36,000

Total= $168,000

Total differential cost= 168000-94700=$73300

Alternative B costs $73300 more than Alternative A. Based only on this information, alternative A is better than alternative B.