Question

Zurasky Corporation is considering two alternatives: A and B. Costs associated with the alternatives are listed below: Alternative A Alternative B Materials costs $28,000 $64,000 Processing costs $34,000 $34,000 Equipment rental $11,000 $28,500 Occupancy costs $19,500 $27,600 What is the differential cost of Alternative B over Alternative A, including all of the relevant costs?

Answer 1

The total differential cost of Alternative B over Alternative A, including all relevant costs, is $61,600. This is calculated by finding the cost differences in materials, equipment rental, and occupancy, which are $36,000, $17,500, and $8,100 respectively.

Step-by-step explanation:

To calculate the differential cost of Alternative B over Alternative A, we need to compare the costs associated with each alternative. Here's how you can calculate it:

• Materials costs difference = $64,000 - $28,000 = $36,000
• Processing costs difference = $34,000 - $34,000 = $0 (since processing costs are the same for both alternatives, they're not included in the differential cost)
• Equipment rental difference = $28,500 - $11,000 = $17,500
• Occupancy costs difference = $27,600 - $19,500 = $8,100

Add up all the differences to find the total differential cost:

Total differential cost = $36,000 + $0 + $17,500 + $8,100 = $61,600

This means that Alternative B is $61,600 more expensive than Alternative A when considering all the relevant costs.

Answer 2

Differential cost of Alternative B over Alternative A=$61,600

Step-by-step explanation:

Differential Cost:

It is the difference in costs if there are more than one alternatives and one alternative is chosen while rejecting the other alternatives.

In order to calculate the differential cost of Alternative B over Alternative A, including all of the relevant costs we first calculate the total cost of both alternatives and then tae the difference.

Total Of Alternative A=Material Cost+Processing Cost+Equipment Rental+occupancy costs.

Total Of Alternative A=$28000+$34000+$11000+$19500=$92,500

Total Of Alternative B=Material Cost+Processing Cost+Equipment Rental+occupancy costs.

Total Of Alternative B=$64000+$34000+$28500+$27600=$154,100

Differential cost of Alternative B over Alternative A=Total Of Alternative B-Total Of Alternative A

Differential cost of Alternative B over Alternative A=$154,100-$92,500

Differential cost of Alternative B over Alternative A=$61,600