Question

Riverbed Company is considering two alternatives. Alternative A will have revenues of $149,000 and costs of $100,600. Alternative B will have revenues of $187,400 and costs of $121,500. Compare Alternative A to Alternative B showing incremental revenues, costs, and net income. (If amount decreases net income then enter the amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)

		Alternative A		Alternative B		Net Income Increase (Decrease)
Revenues		$		$		$
Costs
Net Income		$		$		$

Alternative BAlternative A

is better than

Alternative AAlternative B

.

Answer 1

Answer:

Incremental analysis for the two alternatives should be prepared as follows:

Company Riverbed Incremental Analysis
	Alternative A	Alternative B	Net Income Increase (Decrease)
Revenues	149,000	187,400	38,400
Less costs	100,600	121,500	20,900
Net Income	48,400	65,900	17,500

Net Income from alternative A is $48,400 and from alternative B is $65,900. If alternative B is chosen there will be an increase in net income of $17,500 (65,900-48,400)

Therefore, alternative B is better