Question: A B Incremental Costs (B A) Direct materials $10,000 $10,000 $0 Direct labor $10,000 $15,000 5,000 The incremental costs are simply B A (or A

	A	B	Incremental Costs (B A)
Direct materials	$10,000	$10,000	$0
Direct labor	$10,000	$15,000	5,000

The incremental costs are simply B A (or A B) as shown in column 4. Here is a question for you. Ron Jones is considering replacing an old machine, which he purchased for $15,000 three years ago, with some labor saving equipment. The old machine is being depreciated at $1,500 a year. The following alternative equip options are available for consideration.

Machine A: The purchase price of machine A is $25,000 and a yearly cash operating costs are $5,000.

Machine B: The purchase price of machine B is $28,000 and a yearly cash operating costs are $4,500.

1)What are the incremental costs, if any, in this alternative choice situation?

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