Henry Company is considering spending $100,000 for a new grinding machine. This amount could be invested to yield a 12% return. What is the opportunity cost? A. $112,000 B. $88,000 C. $12,000 D. $100,000
Henry Company is considering spending $100,000 for a new grinding machine. This amount could be invested to yield a 12% return. What is the opportunity cost? A. $112,000 B. $88,000 C. $12,000 D. $100,000
Chapter3: Cost-volume-profit Analysis
Section: Chapter Questions
Problem 7EA: Flanders Manufacturing is considering purchasing a new machine that will reduce variable costs per...
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Question
Henry Company is considering spending $100,000 for a new grinding machine. This amount could be invested to yield a 12% return. What is the opportunity cost?
A. $112,000
B. $88,000
C. $12,000
D. $100,000
Expert Solution
Step 1
Opportunity cost: It can be defined as the cost of the next better alternative that has forgone as a result of choosing the current alternative.
Step 2
Calculation of the opportunity cost as follows:
Result of the above:
Step by step
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