Question

Carmen Co. can further process Product J to produce Product D. Product J is currently selling for $20 per pound and costs $15.75 per pound to produce. Product D would sell for $38 per pound and would require an additional cost of $8.55 per pound to produce. ​ What is the differential cost of producing Product D? a. $6.50 per pound b. $8.55 per pound c. $5.25 per pound d. $17.00 per pound

Answer 1

$8.55

Step-by-step explanation:

Differential cost is the difference between the two alternatives cost of production.

The management may decide to improve the features and quality of a particular product so as to sell it at a higher price and earn more revenue.

The additional cost incurred to arrive at this new feature , also known as the incremental cost is the differential cost

In the scenario given , the additional cost is $8.55 as stated.