QRC Company is trying to decide which one of two alternatives it will accept.The costs and revenues associated with each alternative are listed below: $$\begin{array} { l c r }
& \text { Alternative A } & \text { Alternative B } \
\text { Projected revenue } & \$ 62,500 & \$ 75,000 \
\text { Unit-level costs } & 12,500 & 18,000 \
\text { Batch-level costs } & 6,250 & 12,000 \
\text { Product-level costs } & 7,500 & 8,500 \
\text { Facility-level costs } & 5,000 & 6,250
\end{array}$$ What is the differential revenue for this decision?
A) $25,000
B) $12,500
C) $62,500
D) $75,000

Question

QRC Company is trying to decide which one of two alternatives it will accept.The costs and revenues associated with each alternative are listed below: $$\begin{array} { l c r } 
& \text { Alternative A } & \text { Alternative B } \
\text { Projected revenue } & \$ 62,500 & \$ 75,000 \
\text { Unit-level costs } & 12,500 & 18,000 \
\text { Batch-level costs } & 6,250 & 12,000 \
\text { Product-level costs } & 7,500 & 8,500 \
\text { Facility-level costs } & 5,000 & 6,250
\end{array}$$ What is the differential revenue for this decision?
A) $25,000
B) $12,500
C) $62,500
D) $75,000

Quizplus · Accepted Answer

The differential revenue is calculated by subtracting the revenue of the current alternative from the revenue of the alternative being considered. In this case, the revenue for Alternative B is $175,000 and the revenue for Alternative A is $162,500. Therefore, the differential revenue is $175,000 - $162,500 = $12,500. Based on this analysis, choosing Alternative B would be the best choice as it generates more revenue than Alternative A.

QRC Company Is Trying to Decide Which One of Two