Quiz 25: Differentialana Ysis Andproduct Pricing

Business

It is not ethical for Aaron (cost accountant) to attend the meeting and share the relevant cost data. This is due the Federal Law. The Federal Law prevents companies competing in similar markets from sharing cost price information. Hence, he should not share the relevant cost data.

(a) Differential revenue is the amount of increase or decrease in revenue expected from a particular course of action compared with an alternative. (b) Differential cost is the amount of increase or decrease in cost expected from a particular course of action compared with an alternative. (c) Differential income is the difference between differential revenue and differential cost.

Differential Analysis Differential analysis is a technique that evaluates the cost difference between the alternatives by eliminating the sunk costs and the similar costs between the alternatives. a. Prepare a differential analysis to determine whether Company S should lease or sell the machinery. img Working note: Calculate the amount of costs incurred for sell machinery (Alternative -1). img b. Decision: Company S should sell the machinery because the net income from the sale of machinery is $600 higher than lease of the machinery.

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