Alvarez Company is considering the following alternatives Al

Alvarez Company is considering the following alternatives: Alternative A Alternative B Revenues $50,000 $60,000 Variable costs 30,000 30,000 Fixed costs 10,000 16,000 What is the incremental profit?

Solution

Solution:

Incremental Profit Analysis:-

The meaning of the Incremental Profit Analysis Difference Between the Revenues, Costs.

Revenue Product - A = $ 50,000

Revenue Product - B = $ 60,000

Difference Between Two Products = $ 10,000

Variable Cost of Product - A = $ 30,000

Variable Cost of Product - B = $ 30,000

Difference Between Two Product Costs = $ 0

Fixed Cost of Product - A = $ 10,000

Fixed Cost of Product - B = $ 16,000

Difference Between Two Products = $ 6,000

Incremental Profit = $10,000 - $6,000

Profit = $4,000