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Relevant and Differential Costs

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1. Saalfrank Corporation is considering two alternatives that are code-named M and N. Costs
associated with the alternatives are listed below:

Supplies costs 43000 43000
Assembly costs 43000 56000
Power costs 26000 26000
Inspection costs 19000 26000

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? 

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Solution Summary

The solution illustrates how to determine the relevant and differential costs to use in evaluating two projects.

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a. Which costs are relevant and which are not relevant in the choice between these two alternatives?

Because the supplies costs and power costs are the same under either alternative, neither of ...

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