Question

In 2020, the Allen Company had consulting revenues of $1,247,000 while operating costs were $740,000. In 2021, Allen will be introducing a new service that will generate $169,000 in sales revenues and $59,000 in operating costs. Assuming no changes are expected for the other services, the differential revenue for 2021 will be:

A. $110,000
B. $159,000
C. $169,000
D. $59,000

Answer 1

The differential revenue for the Allen Company in 2021 after introducing a new service is $169,000, which is the additional sales generated by the new service.

Step-by-step explanation:

The question asks for the differential revenue for the Allen Company for the year 2021 after introducing a new service. Differential revenue refers to the additional revenue generated from a particular action or decision. In this case, the new service is projected to generate $169,000 in sales revenue. This is the additional amount compared to the previous year, so the differential revenue for 2021 would be $169,000 (Option C), assuming that revenues from other services remain the same. It is important to note that differential revenue is not adjusted for costs; it only reflects the change in revenue.