Scholastic Tours is trying to decide which one of two tours it will introduce. The costs and revenues associated with each alternative are listed below: $\begin{array}{lcc}
&\text { Eastern Tour}&\text { Western Tour }\
\text { Projected revenue } & \$ 8,000 & \$ 11,000 \
\text { Variable costs } & 1,000 & 6,000\
\text { Fixed costs } & \underline{4,000 }&\underline{ 4,000} \
\text { Profit } &\underline{ \$ 3,000} &\underline{ \$ 1,000}
\end{array}$
What are the incremental (differential) costs of the Western Tour?

Question

Scholastic Tours is trying to decide which one of two tours it will introduce. The costs and revenues associated with each alternative are listed below: $\begin{array}{lcc}
&\text { Eastern Tour}&\text { Western Tour }\
\text { Projected revenue } & \$ 8,000 & \$ 11,000 \
\text { Variable costs } & 1,000 & 6,000\
\text { Fixed costs } & \underline{4,000 }&\underline{ 4,000} \
\text { Profit } &\underline{ \$ 3,000} &\underline{ \$ 1,000}
\end{array}$
 What are the incremental (differential) costs of the Western Tour?

Quizplus · Accepted Answer

The incremental costs of the Western Tour are the additional costs incurred compared to the Eastern Tour. The variable costs for the Western Tour are $6,000, while for the Eastern Tour they are $1,000. The difference is $5,000, which is the incremental cost. Fixed costs are the same for both tours and do not affect the incremental cost.

Scholastic Tours Is Trying to Decide Which One of Two