Partridge Co. can further process Product J to produce Product D Product J is currently selling for $21 per pound and costs $15.75 per pound to produce. Product D would sell for $38 per pound and would require an additional cost of $9.25 per pound to produce.
What is the differential cost of producing Product D?
A) $6.50 per pound
B) $9.25 per pound
C) $17 per pound.
D) $5.25 per pound.

Question

Quizplus · Accepted Answer

The differential cost of producing Product D is the additional cost of producing Product D compared to the current cost of producing Product J. Therefore, the differential cost is: 
($9.25 per pound for producing Product D) - ($15.75 per pound for producing Product J) = -$6.50 per pound. 
Since this is a negative number, it means that producing Product D would actually result in a lower cost than producing Product J. Therefore, the best choice would be to further process Product J into Product D.