Bates Company plans to add a new item to its line of consumer product offerings.Two possible products are under consideration.Each unit of Product A costs $6 to produce and has a contribution margin of $3,while each unit of Product B costs $12 and has a contribution margin of $4.What is the differential revenue for this decision?
A) $7
B) $1
C) $6
D) $9

Question

Quizplus · Accepted Answer

The differential revenue is the difference in the contribution margins of the two products. The contribution margin of Product A is $3 and the contribution margin of Product B is $4. Therefore, the differential revenue is $4 - $3 = $1.

Bates Company Plans to Add a New Item to Its