Hill Co. can further process Product O to produce Product P. Product O is currently selling for $60 per pound and costs $42 per pound to produce. Product P would sell for $82 per pound and would require an additional cost of $13 per pound to produce.
-The differential cost of producing Product P is $55 per pound.

Question

Hill Co. can further process Product O to produce Product P. Product O is currently selling for $60 per pound and costs $42 per pound to produce. Product P would sell for $82 per pound and would require an additional cost of $13 per pound to produce.​
-The differential cost of producing Product P is $55 per pound.

Quizplus · Accepted Answer

The differential cost of producing Product P is the additional cost required to produce Product P from Product O, which is $13 per pound, not $55.

Hill Co Can Further Process Product O to Produce Product P