Chapter 25, Problem S25.7SE

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 the underlying business decisions are taking into consideration and suck cost is ignored.

Relevant Cost: Relevant costs are the incremental and inevitable costs that are incurred when making the specific business decision. Relevant costs are useful in eliminating unrequited data that make decision making process complex.

Outsourcing Decision: Outsourcing decision is the decision whether to produce or manufacture a product or purchase it from outside.

1.

To Find: The alternative factor will maximize Daniels's short term operating income.

To determine

2.

To Find: The qualitative factor that Daniels should consider before decision making.