Asked by zachary kastner on Jun 30, 2024
Verified
In a special order situation that involves using capacity that is not idle, opportunity costs are zero.
Opportunity Costs
The value of the best alternative that is foregone when a different option is chosen.
Special Order
A one-time order that is not considered part of the company’s normal ongoing business.
Capacity
The maximum output that a business can produce in a given period with available resources.
- Comprehend the critical role that opportunity costs play in decision-making.
- Recognize the significance of capacity utilization and its impact on decision-making in special order situations.
Verified Answer
NL
Nicholas LaMotheJul 07, 2024
Final Answer :
False
Explanation :
In a special order situation where capacity is not idle, opportunity costs are not zero because the company must give up the opportunity to use that capacity for other purposes. The company could potentially make more money by using that capacity for its regular orders or other special orders.
Learning Objectives
- Comprehend the critical role that opportunity costs play in decision-making.
- Recognize the significance of capacity utilization and its impact on decision-making in special order situations.
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