Opportunity cost. Richardses' Tree Farm, Inc. has branched into gardening over the years and is now considering adding patio furniture to its product lineup. Currently, the area where the patio furniture is to be displayed is a vacant slab of concrete attached to the indoor shop. The company originally paid $8,000 to put in the slab of concrete three years ago. It would now cost $16,000 to put in the same slab of concrete. Should the company consider the concrete slab when expanding its outdoor garden shop to include patio furniture? If yes, which value should it use? Should the company consider the concrete slab when expanding its outdoor garden shop to include patio furniture? If yes, which value should it use? (Select the best response.) O A. Yes, use $16,000 as the cost. O B. No. The slab is a sunk cost unless there is another use for the slab that could provide cash flow to Richardses' Tree Farm. The additional cash flow that the slab could provide is the opportunity cost, not the current replacement cost or the original cost. O C. Yes, use $8,000 as the cost.

Opportunity cost. Richardses' Tree Farm, Inc. has branched into gardening over the years and is now considering adding patio furniture to its product lineup. Currently, the area where the patio furniture is to be displayed is a vacant slab of concrete attached to the indoor shop. The company originally paid $8,000 to put in the slab of concrete three years ago. It would now cost $16,000 to put in the same slab of concrete. Should the company consider the concrete slab when expanding its outdoor garden shop to include patio furniture? If yes, which value should it use? Should the company consider the concrete slab when expanding its outdoor garden shop to include patio furniture? If yes, which value should it use? (Select the best response.) O A. Yes, use $16,000 as the cost. O B. No. The slab is a sunk cost unless there is another use for the slab that could provide cash flow to Richardses' Tree Farm. The additional cash flow that the slab could provide is the opportunity cost, not the current replacement cost or the original cost. O C. Yes, use $8,000 as the cost.

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter19: Capital Investment

Section: Chapter Questions

Problem 31P: Jonfran Company manufactures three different models of paper shredders including the waste...

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