Saalfrank Corporation is considering two alternatives that are code-named M and

Question

Saalfrank Corporation is considering two alternatives that are code-named M and N. Costs associated with the alterna below tives are liste Supplies costs Assembly costs Power costs Inspection costs $56,000 $31,060 $11,000 $24,800 $50,800 $31,000 $17,800 $13,600 Required: a Which costs are relevant and which are not relevant in the choice between these two alternatives? b. What is the differential cost between the two alternatives? a. Supplies costs Assembly costs Power costs Inspection costs b Differential cost

Explanation / Answer

Saalfrank Corporation Alternative M Alternative N Supplies Costs $            56,000.00 $          50,000.00 Assembly Costs $            31,000.00 $          31,000.00 Power Costs $            11,000.00 $          17,000.00 Inspection Costs $            24,000.00 $          13,000.00 Relevant Irrelevant a) Supplies Costs Relevant Assembly Costs Irrelevant Power Costs Relevant Inspection Costs Relevant Relevant Cost: Cost which are different in both alternatives. Irrelevant Cost: Cost which are same in both alternatives. (A) (B) (B)-(A) b) Alternative M Alternative N Differential Supplies Costs $            56,000.00 $          50,000.00 $       -6,000.00 Assembly Costs $            31,000.00 $          31,000.00 $                     -   Power Costs $            11,000.00 $          17,000.00 $        6,000.00 Inspection Costs $            24,000.00 $          13,000.00 $    -11,000.00 Total $        1,22,000.00 $      1,11,000.00 $    -11,000.00

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