Question

Zurasky Corporation is considering two alternatives: A and B. Costs associated with the alternatives are listed below: Alternative A Alternative B Materials costs $44,000 $59,000 Processing costs $50,000 $50,000 Equipment rental $11,800 $28,900 Occupancy costs $19,900 $30,800 What is the differential cost of Alternative B over Alternative A, including all of the relevant costs?

Answer 1

Answer:

The differential cost of Alternative B over Alternative A is $43,000

Explanation:

In order to calculate the differential cost of Alternative B over Alternative A we  would have to Compute the total cost of Alternative A and Alternative B as follows:

total cost of Alternative A= Materials costs +  Processing costs + Equipment rental + Occupancy costs

total cost of Alternative A=$44,000+$50,000+$11,800+$19,900

total cost of Alternative A=$125,700

total cost of Alternative B= Materials costs +  Processing costs + Equipment rental + Occupancy costs

total cost of Alternative B=$59,000+$50,000+$28,900+$30,800

total cost of Alternative B=$168,700

differential cost of Alternative B over Alternative A=total cost of Alternative B-total cost of Alternative A

differential cost of Alternative B over Alternative A=$168,700-$125,700

differential cost of Alternative B over Alternative A=$43,000