Heston and Burton, CPAs, currently work a five-day week. They estimate that net income for the firm would increase by $75,000 annually if they worked an additional day each month. The cost associated with the decision to continue the practice of a five-day workweek is an example of a (n)
A) differential revenue
B) sunk cost
C) differential income
D) opportunity cost

Question

Quizplus · Accepted Answer

The cost associated with the decision to continue the practice of a five-day workweek is an opportunity cost, as it represents the potential benefits forgone by not switching to a six-day workweek. The $75,000 increase in net income is a differential income, as it represents the incremental revenue generated by the additional day worked each month.

Heston and Burton, CPAs, Currently Work a Five-Day Week