Differential analysis: Differential analysis is a cost analysis method in which two or more alternative business decisions are compared with each other to find out the best alternative decision. Under this approach only relevant costs of underlying business decision are taken into consideration and suck cost is ignored. Relevant Cost: Relevant cost is the incremental and inevitable cost that is incurred when making a specific business decision. Relevant cost is useful in eliminating unrequited data that makes decision making process complex. Irrelevant Cost: Irrelevant cost is the cost that will remains unchanged as a result of specific business decisions 1. To Prepare: The differential analysis to show whether Security Team should drop the industrial system product line or not.

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Chapter 25, Problem P25.29BPGB

To determine

Concept Introduction:

Differential analysis: Differential analysis is a cost analysis method in which two or more alternative business decisions are compared with each other to find out the best alternative decision. Under this approach only relevant costs of underlying business decision are taken into consideration and suck cost is ignored.

Relevant Cost: Relevant cost is the incremental and inevitable cost that is incurred when making a specific business decision. Relevant cost is useful in eliminating unrequited data that makes decision making process complex.

Irrelevant Cost: Irrelevant cost is the cost that will remains unchanged as a result of specific business decisions

1.

To Prepare: The differential analysis to show whether Security Team should drop the industrial system product line or not.

To determine

2.

To Prepare: The contribution margin income statement for total operating income under the two alternatives given in question and compare the difference with the answer of requirement 1.

To determine

3.

To Explain: The learning from the comparison in requirement 2.

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