Question

Ouzts Corporation is considering Alternative A and Alternative B. Costs associated with the alternatives are listed below:



Alternative A Alternative B
Materials costs
$ 40,000 $ 56,000
Processing costs
$ 37,000 $ 37,000
Equipment rental
$ 13,000 $ 13,000
Occupancy costs
$ 15,000 $ 22,000


What is the financial advantage (disadvantage) of Alternative B over Alternative A?

Answer 1

Answer: Disadvantage of $23000

Explanation:

Costs associated with Alternative A:

40000+37000+13000+15000

Total cost = $105000

Cost associated with Alternative B:

56000+37000+13000+22000

Total cost = $128000

To find the advantage/disadvantage we have to find the difference in the costs: 105000 - 128000

Disadvantage of $23000