Question

Calculator Carmen Co. can further process Product J to produce Product D. Product J is currently selling for $20.00 per pound and costs $15.75 per pound to produce. Product D would sell for $38.00 per pound and would require an additional cost of $8.55 per pound to produce. The differential cost of producing Product D is

Answer 1

Answer:

The differential cost = $8.55

Explanation:

When there is a contrast between the cost of two alternatives to decide to process further or not, it is termed as a differential cost. Company uses the differential cost concept when there are more than one products to produce.

Here, the company has two products - Product J and Product D. Product J is selling currently with a cost of $15.75. If the company wants to produce Product D, they need additional $8.55 cost. Therefore, $8.55 is the differential cost of producing product D.