Reference no: EM132787353

Abba company is evaluating two alternative plans to produce its major product line. Following are the expected production costs under the two plans:

                                          Plan 1                    Plan 2

Variable costs:

Materials                        5.00                  5.25
Labor                            7.00                      6.50
Factory overhead              3.00                    3.00

Fixed costs:

Depreciation                     P10,000              P10,000
Maintenance                        5,000                 6,000
Insurance                             2,500                   3,000
Rent                                    3,000                      3,000

Required:

Question a. Identify the relevant cost items

Question b. Assuming that both plants call for the production of 10,000 units of the poduct, compute the differential costs between the two plan