1. 1.Assumeacompanyhasequipmentwithabookvalueof$50,000.TheCompanycanselltheequipmentthroughabrokerfor$90,000lessa4%commissionfee.Alternatively,theCompanycouldleasetheequipmenttoanotherpartyfor3yearsatapriceof$130,000.Attheendofthethreeyears,theequipmentisexpectedtohavenoresidualvalue(bookvalueof$0).Iftheequipmentisleased,theCompanywillincurtotalestimatedexpensesof$12,000forthethreeyearsformaintenance,insuranceandtaxes.

   Whatisthedifferentialnetincome?

   $31,600

   $86,400

   $40,000

   $12,000

2.A company manufactures a product (A) for a total production cost of $13,000, which can be sold for $50,000. The company has the option to process this product further to create product B for anadditionalcost of $10,000. Product B can be sold for $58,000. What is thedifferential costbetween these two options?

$37,000

$8,000

$10,000

$2,000