Question

Whiteville Co. can further process Product B to produce Product C. Product B is currently selling for $45 per pound and costs $30 per pound to produce. Product C would sell for $80 per pound and would require an additional cost of $18 per pound to produce. What is the differential cost of producing Product C

Answer 1

In this case, the differential cost os $18.

Step-by-step explanation:

The differential cost is the increase in unitary or total production value in two or more steps of the decision-making process. In this case, the unitary cost of product B is not a differential cost. It would remain constant in both products, but, the additional $18 is a cost incurred only in product C.

In this case, the differential cost os $18.