Question

Pear 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 Are the materials costs and processing costs relevant in the choice between alternatives A and B

Answer 1

Answer:

Yes

Explanation:

The analysis will need to compare all categories of cost.

It will calculate the difference in cost for each category and then add them for the total difference. That way, the company know which alternative is better.

                     AlternativeA Alernative B Diffence

Direc Materials         40                    56 -16

Processing Cost          37                    37 0

Equipment Rental           13                     13 0

Occupancy Cost           15                     22 -7

                                105                   128 -23