Question

Yasmin Co. can further process Product B to produce Product C. Product B is currently selling for $30 per pound and costs $28 per pound to produce. Product C would sell for $55 per pound and would require an additional cost of $31 per pound to produce. The differential cost of producing Product C is

Answer 1

Answer:

$31 per pound

Explanation:

Since the company wants to process further the product B to Product C, the additional cost to process will be the differential cost. We know that the differential cost is the difference between the two alternative outputs' prices. When there is more than one option to make a choice, the differential cost plays a vital role.

In this case, the selling price will not affect whether to process or not. However, the differential cost of producing the new product is $31/pound, as it requires an additional cost.