Two Alternatives,identified X and Y,are Under Consideration at Hayden Corporation

question 92

Multiple Choice

Two alternatives,identified X and Y,are under consideration at Hayden Corporation.Costs associated with the alternatives are listed below:
$$\begin{array} { | l | r | r | } \hline & \text { Altemative } \times & \text { Altemative } \mathrm { Y } \\\hline \text { Material costs } & \$ 44,000 & \$ 56,000 \\\hline \text { Processing costs } & 37,000 & 59,000 \\\hline \text { Building costs } & 14,000 & 14,000 \\\hline \text { Equipment rental } & 11,000 & 11,000 \\\hline\end{array}$$
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:

Operating Cash Flow

The cash generated by a company’s normal business operations, indicating whether the company can maintain and grow its operations.

Sales Revenues

Income received from selling goods or services over a period of time before any costs or expenses are deducted.

Capital Cost Allowance

A form of tax depreciation that allows businesses in Canada to deduct the cost of a depreciable property over several years.

Cash Operating Costs

Expenses associated with the day-to-day operations of a business that are paid out in cash.