Question

Pear Corporation is considering Alternative A and Alternative B. Costs associated with the alternatives are listed below: Alternative A Alternative B Materials costs $ 40,000 $ 56,000 Processing costs $ 37,000 $ 37,000 Equipment rental $ 13,000 $ 13,000 Occupancy costs $ 15,000 $ 22,000 Are the materials costs and processing costs relevant in the choice between alternatives A and B

Answer 1

Yes

Step-by-step explanation:

The analysis will need to compare all categories of cost.

It will calculate the difference in cost for each category and then add them for the total difference. That way, the company know which alternative is better.

AlternativeA Alernative B Diffence

Direc Materials 40 56 -16

Processing Cost 37 37 0

Equipment Rental 13 13 0

Occupancy Cost 15 22 -7

105 128 -23