Asked by Margaret Galeener on Apr 30, 2024
Verified
The opportunity cost of making a component part in a factory with excess capacity for which there is no alternative use is:
A) the variable manufacturing cost of the component.
B) the total manufacturing cost of the component.
C) the fixed manufacturing cost of the component.
D) zero.
Opportunity Cost
The cost associated with not choosing the next best alternative when making a decision, representing the benefits one could have received by taking an alternative action.
Alternative Use
The value or potential benefit that is foregone as a result of using an asset or resource in a particular way instead of another possible way.
- Recognize the significance of opportunity costs and sunk costs in business decisions.
Verified Answer
KA
Kaycee AlanisMay 03, 2024
Final Answer :
D
Explanation :
The opportunity cost is the cost of the best alternative forgone. In this case, since there is no alternative use for the excess capacity, there is no opportunity cost. Thus, the answer is D, zero.
Learning Objectives
- Recognize the significance of opportunity costs and sunk costs in business decisions.