Question

If the total cost of alternative A is $62,000 and the total cost of alternative B...

If the total cost of alternative A is $62,000 and the total cost of alternative B is $51,000, then $11,000 is termed the:

Multiple Choice

opportunity cost.

average cost.

sunk cost.

out -of-pocket cost.

differential cost.

Business   Accounting   
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Answer #1

Answer: Differential Cost

Differential cost refers to the difference between the cost of two alternative decisions. The cost occurs when a business faces several options, and a choice must be made by picking one option and dropping the other.

Here, if we choose between alternative A and alternative B , then the difference between alternative A and alternative B will be ($62000-$51000) = 11000$

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