Alvarez Company is considering the following alternatives: $$\begin{array} { l c c }
& \text { Alternative A } & \text { Alternative B } \
\text { Revenues } & \$ 50,000 & \$ 60,000 \
\text { Variable costs } & 30,000 & 30,000 \
\text { Fixed costs } & 10,000 & 16,000
\end{array}$$ What is the incremental profit?

Question

Alvarez Company is considering the following alternatives: $$\begin{array} { l c c } 
& \text { Alternative A } & \text { Alternative B } \
\text { Revenues } & \$ 50,000 & \$ 60,000 \
\text { Variable costs } & 30,000 & 30,000 \
\text { Fixed costs } & 10,000 & 16,000
\end{array}$$ What is the incremental profit?

Quizplus · Accepted Answer

Incremental profit is calculated as the difference in revenues minus the difference in costs between the two alternatives. The difference in revenues is $60,000 - $50,000 = $10,000. The difference in costs (variable + fixed) is $30,000 + $16,000 - ($30,000 + $10,000) = $6,000. Therefore, the incremental profit is $10,000 - $6,000 = $4,000.

Alvarez Company Is Considering the Following Alternatives What Is the Incremental Profit? A)$10,000 B)$0 C)$6,000 D)$4,000

Alvarez Company Is Considering the Following Alternatives What Is the Incremental Profit?
A)$10,000
B)$0
C)$6,000
D)$4,000