Nickin Corporation is considering two alternatives, code-named M and N. Costs associated with the alternatives are listed below: Required: a. Which costs are relevant and which are not relevant in the choice between these two alternatives? Supplies costs Power costs Inspection costs Assembly costs b. What is the differential cost between Alternative M and Alternative N? (Negative amount should be indicated by a minus sign.)
Answer a.
Relevant cost will differ between the two projects, whereas not relevant cost will be same under both projects.
So, Supplies Costs, Inspection Costs and Assembly Costs are relevant costs and Power costs is not relevant cost.
Answer b.
So, the differential cost between Alternative M and Alternative N is $8,000
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