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.
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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