Cybil Baunt just inherited a 1958 Chevy Impala from her late Aunt Joop. Aunt Joop purchased the car 40 years ago for $6,000. Cybil is either going to sell the car for $8,000 or have it restored and sell it for $22,000. The restoration will cost $6,000. Cybil would be better off by:
$2,000 to have the vehicle restored$6,000 to have the vehicle restored$8,000 to have the vehicle restored$10,000 to have the vehicle restored
| |
Alternative A |
Alternative B |
| Materials costs |
$33,000 |
$53,000 |
| Processing costs |
$38,000 |
$57,000 |
| Equipment rental |
$11,000 |
$11,000 |
| Occupancy costs |
$18,000 |
$29,000 |
What is the differential cost of Alternative B over Alternative A, including all of the relevant costs?
$150,000$100,000$125,000$50,000
10) Nicklin Corporation is considering two alternatives that are, code-named M and N. Costs associated with the alternatives are listed below:
| |
Alternative M |
Alternative N |
| Supplies costs |
$74,000 |
$65,000 |
| Assembly costs |
$46,000 |
$46,000 |
| Power costs |
$26,000 |
$39,500 |
| Inspection costs |
$39,000 |
$28,000 |
| |
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?