Question
A B Incremental Costs (B A) Direct materials $10,000 $10,000 $0 Direct labor $10,000 $15,000 5,000 The incremental costs are simply B A (or A
| A | B | Incremental Costs (B A) | |
| Direct materials | $10,000 | $10,000 | $0 |
| Direct labor | $10,000 | $15,000 | 5,000 |
The incremental costs are simply B A (or A B) as shown in column 4. Here is a question for you. Ron Jones is considering replacing an old machine, which he purchased for $15,000 three years ago, with some labor saving equipment. The old machine is being depreciated at $1,500 a year. The following alternative equip options are available for consideration.
Machine A: The purchase price of machine A is $25,000 and a yearly cash operating costs are $5,000.
Machine B: The purchase price of machine B is $28,000 and a yearly cash operating costs are $4,500.
- 1)What are the incremental costs, if any, in this alternative choice situation?
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College Accounting Chapters 1-13
Authors: John Price, M David Haddock, Michael Farina
13th Edition
007743062X, 9780077430627
