Answer and Explanation:
a. The cost that are relevant or irrelevant is shown below:-
Relevant costs are those costs which influence the company's decision-making process and these costs vary between alternatives. However, irrelevant costs are the same for each alternative and thus do not impact decision-making processes.
Supplies costs = Relevant
Supplies cost is relevant as amount are vary between alternatives
Power cost = Irrelevant
Power cost is relevant as amount is not vary between the alternatives
Inspection cost = Relevant
Inspection cost is relevant as amount are vary between alternatives
Assembly cost = Relevant
Assembly cost is Relevant as amount are vary between alternatives
b. The computation of differential cost between Alternative M and Alternative N is shown below:-
Alternative M Alternative N Differential cost
Supplies costs $77,000 $68,000 $9,000
Power costs $49,000 $49,000 $0
Inspection costs $29,000 $44,000 -$15,000
Assembly costs $42,000 $31,000 $11,000
Differential cost $197,000 $192,000 $5,000
