Ouzts Corporation is considering Alternative A and Alternative B. Costs associated with the alternatives are listed below: Alternative A Alternative B
Materials costs$44,000 $60,800
Processing costs$40,600 $40,600
Equipment rental$14,200 $14,200
Occupancy costs$16,300 $24,000
What is the financial advantage (disadvantage) of Alternative B over Alternative A?
A. $115,100
B. $(24,500)
C. $139,600
D. $127,350

$(24,500)

Explanation:

Calculation for What is the financial advantage (disadvantage) of Alternative B over Alternative A

Using this formula

Financial advantage of Alternative B over Alternative A

= Difference between Material costs and Occupancy costs

Let plug in the formula

Financial advantage of Alternative B over Alternative A= (44,000-60,800) + (16,300 - 24,000)

Financial advantage of Alternative B over Alternative A=16,800+7,700

Financial advantage of Alternative B over Alternative A= ($24,500)

Therefore the financial advantage (disadvantage) of Alternative B over Alternative A will be ($24,500)