San Juan, Inc. is considering two alternatives: A and B. The costs associated with the alternatives are listed below:
$$\begin{array} { l c c }
& \text { Alternative A } & \text { Alternative B } \
\text { Material costs } & \$ 35,000 & \$ 57,000 \
\text { Processing costs } & 36,000 & 57,000 \
\text { Building costs } & 12,00 C & 28,000 \
\text { Equipment rental } & 19,000 & 19,00 C
\end{array}$$
-
If only the differential costs of the two decisions are considered, the total differential costs of Alternative B is:
A) $161,000.
B) $131,500.
C) $59,000.
D) $102,000.

Question

San Juan, Inc. is considering two alternatives: A and B. The costs associated with the alternatives are listed below:
$$\begin{array} { l c c } 
& \text { Alternative A } & \text { Alternative B } \
\text { Material costs } & \$ 35,000 & \$ 57,000 \
\text { Processing costs } & 36,000 & 57,000 \
\text { Building costs } & 12,00 C & 28,000 \
\text { Equipment rental } & 19,000 & 19,00 C
\end{array}$$
-
If only the differential costs of the two decisions are considered, the total differential costs of Alternative B is:
A) $161,000.
B) $131,500.
C) $59,000.
D) $102,000.

Quizplus · Accepted Answer

The differential costs are the differences in costs between the two alternatives. Material costs differ by $22,000, processing costs by $21,000, and building costs by $16,000. Equipment rental is the same for both. The total differential cost is $22,000 + $21,000 + $16,000 = $59,000.

San Juan, Inc - If Only the Differential Costs of the Two Decisions

San Juan, Inc -
If Only the Differential Costs of the Two Decisions