Question

Nicklin Corporation is considering two alternatives that are, code-named M and N. Costs associated with the alternatives are listed below Supplies costs Assembly costs Power costs Inspection costs ative $72.000 $45,000 $25.000 $38,000 $84.000 $45,000 $38.000 $27,000 Required: a. Which costs are relevant and which are not relevant in the choice between these two alternatives? Supplies costs Assembly costs Power costs Inspection costs b. What is the differential cost between the two alternatives? ifferental oost

Answer 1

Nicklin Corporation Reqa Supplies costs Assembly costs Power costs Inspection costs Relevant Not Relevant Relevant Relevant Relevant costs are costs that will change between alternative course of actions of the company Not relevant costs remain the same Reg b Differential cost 6,000 Workings Supplies costs Assembly costs Power costs Inspection costs Total costs Alternative M Alternative N Differential costs 72,000 45,000 25,000 38,000 180,000 64,000 45,000 38,000 27,000 174,000 8,000 (13,000) 11,000 6,000 Differential costs are the difference between costs of alternative course of actions