Question

Noel Stewart bought a machine two years ago for $500. He must now replace the old machine by buying a new model 206 for $700 or a used model 204 for $650. Noel has decided to buy model 204.In making his decision, Noel should consider the differential cost to be:A) $50.B) $200.C) $150.D) $500.

Answer 1

A) $50

Step-by-step explanation:

Differential cost: It is that cost which shows a difference between two alternatives choices. The benefit which comes after the exchange of alternatives would be termed as differential cost.

In mathematically,

Differential cost = Buying model - usage model

= $700 - $650

= $50