Nestle Company paid $130,000 for a machine used to mill oats.The annual contribution margin from oat sales is $60,000.The machine could be sold for $80,000.The opportunity cost of producing wheat flour is _____.
A)$130,000
B)$80,000
C)$60,000
D)$20,000

Question

Quizplus · Accepted Answer

The opportunity cost in this context is the next best alternative forgone by choosing to use the machine for milling oats instead of selling it. Therefore, the opportunity cost is the amount the machine could be sold for, which is $80,000.

Nestle Company Paid $130,000 for a Machine Used to Mill