Question

The amount of increase or decrease in cost that is expected from a particular course of action as compared with an alternative is:

Answer 1

Answer:

Differential cost

Explanation:

Differential cost is defined as variance in cost that will be incurred between two courses of action. This is used to evaluate the best option of two investments under consideration.

The option that has more revenue will have less cost. So differential cost calculation is used to determine line of action that will bring least cost.

For example if one alternative action will entail use of a warehouse of $30,000, and the alternative is to use just in time inventory practice thereby requiring $10,000 in storage cost.

The best option is the just in time option