Costs associated with two alternatives, code-named Q and R, being considered by Albiston Corporation are listed below: Alternative Q Alternative RSupplies costs$65,000 $65,000 Power costs$30,000 $29,000 Inspection costs$18,000 $29,000 Assembly costs$33,000 $33,000 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?
What will be an ideal response?
a.
| Supplies costs | Not relevant because the costs do not differ between alternatives |
| Power costs | Relevant, since costs differ between alternatives |
| Inspection costs | Relevant, since costs differ between alternatives |
| Assembly costs | Not relevant because the costs do not differ between alternatives |
| Alternative Q | Alternative R | Differential | |||||||
| Supplies costs | $ | 65,000 | $ | 65,000 | $ | 0 | |||
| Power costs | 30,000 | 29,000 | ( 1,000 | ) | |||||
| Inspection costs | 18,000 | 29,000 | 11,000 | ||||||
| Assembly costs | 33,000 | 33,000 | 0 | ||||||
| Total | $ | 146,000 | $ | 156,000 | $ | 10,000 | |||
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