Yasmin Co. can further process Product B to produce Product C. Product B is currently selling for $30 per pound and costs $28 per pound to produce. Product C would sell for $55 per pound and would require an additional cost of $31 per pound to produce. What is the differential cost of producing Product C?
A) $30 per pound
B) $31 per pound
C) $28 per pound
D) $55 per pound

Question

Quizplus · Accepted Answer

The differential cost of producing Product C can be calculated as follows:
Cost of producing Product B = $28 per pound
Additional cost to produce Product C = $31 per pound
Total cost of producing Product C = $28 + $31 = $59 per pound
Selling price of Product C = $55 per pound
Therefore, the differential cost of producing Product C = Selling price of Product C - Total cost of producing Product C
= $55 - $59
= -$4 per pound (negative because the cost is greater than the selling price)
Hence, the differential cost of producing Product C is $31 per pound, which is the additional cost to produce it above the cost of producing Product B.

Yasmin Co Can Further Process Product B to Produce Product C