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Only materials costs are relevant Only processing costs are relevant What is the

ID: 2635721 • Letter: O

Question

Only materials costs are relevant

Only processing costs are relevant

What is the differential cost of Alternative Y over Alternative X, including all of the relevant costs?

$103,000

$39,000

$142,000

$122,500

Both materials costs and processing costs are relevant

Neither materials costs nor processing costs are relevant

Only materials costs are relevant

Only processing costs are relevant

What is the differential cost of Alternative Y over Alternative X, including all of the relevant costs?

$103,000

$39,000

$142,000

$122,500

Both materials costs and processing costs are relevant

Neither materials costs nor processing costs are relevant

Two alternatives, code-named X and Y, are under consideration at Afalava Corporation. Costs associated with the alternatives are listed below. Are the materials costs and processing costs relevant in the choice between alternatives X and Y? (Ignore the equipment rental and occupancy costs in this question.) Only materials costs are relevant Only processing costs are relevant What is the differential cost of Alternative Y over Alternative X, including all of the relevant costs? $103,000 $39,000 $142,000 $122,500 Both materials costs and processing costs are relevant

Explanation / Answer

Only processing cost is relevant as relevant cost means the cost which help to take the decision.In other words we can say the cost which have an influence on decision making.

Material cost is irrelevant cost in this case as although it continue to remain same in each alternative course of action but does not continue to occur when no alternative course of action to be considered.

Differential cost of alternative Y over alternative X including all relevant cost will be $ 39000.