The costs and revenues associated with two alternatives are listed below:

Alternative 1 Alternative 2

Projected revenue $ 100,000 $ 125,000

Unit-level costs 20,000 30,000

Batch-level costs 20,000 25,000

Product-level costs 15,000 15,000

Facility-level costs 10,000 10,000

Which alternative should be selected based on this information?

A. Alternative 2 because it has a higher profit

B. Alternative 1 because it has fewer unit-level costs

C. Alternative 2 because it has the same product-& facility-level costs

D. Alternative 1 because it has a higher profit.

Question

Business

Kaydence Leblanc

15 June, 16:42

The costs and revenues associated with two alternatives are listed below:

Alternative 1 Alternative 2

Projected revenue $ 100,000 $ 125,000

Unit-level costs 20,000 30,000

Batch-level costs 20,000 25,000

Product-level costs 15,000 15,000

Facility-level costs 10,000 10,000

Which alternative should be selected based on this information?

A. Alternative 2 because it has a higher profit

B. Alternative 1 because it has fewer unit-level costs

C. Alternative 2 because it has the same product-& facility-level costs

D. Alternative 1 because it has a higher profit.

+3

Answers (1)

Know the Answer?

Sam · Answer 1

The correct option is A, alternative 2 because it has a higher profit

Explanation:

The profit analysis of both alternatives is done below:

Alternative 1 Alternative 2

Projected revenue $100,000 $125,000

Costs:

unit level costs $20,000 $30,000

Batch-level costs $20,000 $25,000

Product-level costs $15,000 $15,000

facility-level costs $10,000 $10,000

total costs $65,000 $80,000

Profit (revenue-total costs) $35,000 $45,000

The correct answer is option A, as option 2 has a higher profit of $45,000 compared to alternative 1 of $35,000