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Use this information for Carmen Co. to answer the question that follow. Carmen Co. can further...

Use this information for Carmen Co. to answer the question that follow. Carmen Co. can further process Product J to produce Product D. Product J is currently selling for $21.85 per pound and costs $16.85 per pound to produce. Product D would sell for $41.40 per pound and would require an additional cost of $9.50 per pound to produce. What is the differential cost of producing Product D?

a.$7.60 per pound

b.$9.50 per pound

c.$5.70 per pound

d.$11.40 per pound

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Yasmin Co. can further process Product B to produce Product C. Product B is currently selling for $31 per pound and costs $27 per pound to produce. Product C would sell for $57 per pound and would require an additional cost of $24 per pound to produce. What is the differential cost of producing Product C?

a.$24 per pound

b.$27 per pound

c.$31 per pound

d.$57 per pound

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Sage Company is operating at 90% of capacity and is currently purchasing a part used in its manufacturing operations for $14.00 per unit. The unit cost for the business to make the part is $21.00, including fixed costs and $10.00, excluding fixed costs. If 34,785 units of the part are normally purchased during the year but could be manufactured using unused capacity, what would be the amount of differential cost increase or decrease from making the part rather than purchasing it?

a.$486,990 cost decrease

b.$139,140 cost decrease

c.$243,495 cost increase

d.$139,140 cost increase

Expert Solution

1.b.$9.50
Differential cost of a product is stated as the additional cost of producing the product.

Differential cost of product D=Total cost to produce D-Cost of producing J

Total cost of product D=Cost of producing product J+Additional cost to produce D

Total cost of product D=$16.85+$9.50=$26.35

Differential cost=$26.35-$16.85

Differential cost of D=$9.50 per pound

This,$9.50 woulde be differential cost for producing product D.

2.a.$24 per pound

Differential cost of product C=Total cost to produce C-Cost of producing B

Total cost of product C=Cost of product B+Additional cost to produce C

Total cost of product C=$27+$24=$51

Differential cost=$51-$27

Differential cost=$24 per pound

C.b.$139,140 cost decrease

Differential cost=(cost of purchasing part-unit cost)*purchased units

Differntial cost=(14-10)*34,785 units
Differential cost=4*34,785 units

Differential cost=$139,140 cost decrease

ekkarill92 answered 2 years ago

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