I have had this question reviewed by an online tutorial assistant and would like to have it checked over by somebody else. I believe that the answer is correct but would still like a second opinion to be sure. I appreciate all the help the OTA has given me so far but believe that it is always prudent to gain a second opinion. So if you have time, could you please review the answer and provide any reasoning why you opinion may differ from the one provided.
I'll provide the question and the proposed solution. It is a differential margin question looking at the proposed addition to a department at the hospital. The topics we have studied so far have focused on incremental revenue and costing. We have not specifically talked about differential margins but I am assuming that this is the difference between the two.
Also I have a negative figure for each of the differential margins and have therefore chosen the one that is closest to zero. But the question also requires us to calculate a 'return on capital' for each option. Maybe I should leave out the opportunity costs when calculating the return on capital?