Two Alternatives, Identified X and Y, Are Under Consideration at Hayden

question 113

Multiple Choice

Two alternatives, identified X and Y, are under consideration at Hayden Corporation. Costs associated with the alternatives are listed below.
$$\begin{array} { l r r } & \text { Alternative X } & \text { Alternative Y } \\\text { Material costs } & \$ 44,000 & \$ 56,000 \\\text { Processing costs } & 37,000 & 59,000 \\\text { Building costs } & 14,000 & 14,000 \\\text { Equipment rental } & 11,000 & 11,000\end{array}$$
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Are the materials costs and processing costs differential in the choice between alternatives X and Y? (Ignore the building costs and equipment rental in this question.)

• A) Both materials costs and processing costs are differential.
• B) Only materials costs are differential.
• C) Only processing costs are differential.
• D) Neither materials costs nor processing costs are differential.

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Definitions:

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An investor who owns less than 50% of a company's shares and therefore does not have control over company decisions but may still enjoy rights such as receiving dividends.

DCF Stock Valuation Model

A method to estimate the value of a stock by using predicted cash flows and discounting them to present value.