ECONOMICS

Detailed explanation-1: -Differential cost is the difference between the cost of two alternative decisions, or of a change in output levels. The concept is used when there are multiple possible options to pursue, and a choice must be made to select one option and drop the others.

Detailed explanation-2: -Differential cost refers to the difference between the cost of two alternative decisions. The cost occurs when a business faces several similar options, and a choice must be made by picking one option and dropping the other.

Detailed explanation-3: -Differential cost refers to the difference in costs between two or more business decisions. Specifically, a differential cost arises when there are multiple similar options and it’s necessary to select one at the forfeiture of others.

Detailed explanation-4: -An incremental cost is the difference in total costs as the result of a change in some activity. Incremental costs are also referred to as the differential costs and they may be the relevant costs for certain short run decisions involving two alternatives.

Detailed explanation-5: -A variable cost is a cost that varies in total amount in direct proportion to changes in the level of activity. A differential cost is the difference in cost between two alternatives. If the level of activity is the same for the two alternatives, a variable cost will not be affected and it will be irrelevant.