Question

Bates Company plans to add a new item to its line of consumer product offerings. Two possible products are under consideration. Each unit of Product A costs $10 to produce and has a contribution margin of $5, while each unit of Product B costs $18 and has a contribution margin of $6. What is the differential revenue for this decision

Answer 1

the Differential revenue is $9

Step-by-step explanation:

The computation of the differential revenue is shown below:

Differential revenue is

= (Product B) - (Product A)

= (Cost + contribution margin) - (Cost + contribution margin)

= ($18 + $6) - ($10 + $5)

= $24 - $15

= $9

hence, the Differential revenue is $9

Therefore the same is to be considered

We simply applied the above formula