Jimbob Company has two business alternatives - A & B with different total annual costs as 72) set out below: $$\begin{array} { | l | l | l | }
\hline \text { Total annual costs: } & A & B \
\hline \text { Advertising } & \$ 32,000 & \$ 31,000 \
\hline \text { Other marketing costs } & \$ 18,000 & \$ 12,000 \
\hline \text { Other expenses } & \$ 30,000 & \$ 35,000 \
\hline
\end{array}$$ Additionally, if alternative B is chosen the business will have to use some space for its own purposes that are currently being rented to an outside business for $5,000 per year. What are the total differential costs between the two alternatives?
A)$7,000.
B)$5,000.
C)$2,000.
D)$3,000.

Question

Jimbob Company has two business alternatives - A & B with different total annual costs as 72) set out below: $$\begin{array} { | l | l | l | } 
\hline \text { Total annual costs: } & A & B \
\hline \text { Advertising } & \$ 32,000 & \$ 31,000 \
\hline \text { Other marketing costs } & \$ 18,000 & \$ 12,000 \
\hline \text { Other expenses } & \$ 30,000 & \$ 35,000 \
\hline
\end{array}$$ Additionally, if alternative B is chosen the business will have to use some space for its own purposes that are currently being rented to an outside business for $5,000 per year. What are the total differential costs between the two alternatives?
A)$7,000.
B)$5,000.
C)$2,000.
D)$3,000.

Quizplus · Accepted Answer

The total differential costs between the two alternatives are calculated by comparing the total costs of each alternative and considering the lost rental income from choosing alternative B. For alternative A, the total cost is $32,000 + $18,000 + $30,000 = $80,000. For alternative B, the total cost is $31,000 + $12,000 + $35,000 = $78,000, plus the lost rental income of $5,000, making it $83,000. The difference between $83,000 and $80,000 is $3,000.

Jimbob Company Has Two Business Alternatives - a & B