Question

Scholastic Tours is trying to decide which one of two tours it will introduce. The costs and revenues associated with each alternative are listed below: Eastern Tour Western Tour Projected revenue $ 15,000 $ 18,000 Variable costs 1,000 8,000 Fixed costs 5,000 5,000 Profit $ 9,000 $ 5,000 What are the incremental (differential) costs of the Western Tour

Answer 1

$7,000

Step-by-step explanation:

The computation of the incremental (differential) costs of the Western Tour is shown below:

Total cost for eastern tour

= variable cost + fixed cost

= $1,000 + $5,000

= $6,000

And, the total cost for western tour is

= variable cost + fixed cost

= $8,000 + $5,000

= $13,000

So, the different in the cost is

= $13,000 - $6,000

= $7,000