Question

Green Co. incurs a cost of $15 per pound to produce product X, which it sells for $26 per pound. The company can further process product X to produce product Y. Product Y would sell for $30 per pound and would require an additional cost of $10 per pound to be produced.

The differential cost of producing product Y is:

a) $15 per pound
b) $26 per pound
c) $10 per pound
d) $30 per pound

Answer 1

c) $10 per pound

Step-by-step explanation:

Differential cost is the cost difference of one plan when compared to another. it is the difference in cost between 2 alternative decision.

The product x has a cost of $ 15 per pound . The company later modified product X to produce product Y. The additional cost for product Y after modification of X is $ 10. The cost of producing product Y is 15 + 10 = $ 25.

The differential cost of producing product Y is the difference of the cost of producing product Y and product X. it can be computed as 25 - 15 = $ 10 per pound .