When manufacturing cycle increases, ________.
A) sunk costs will decrease
B) opportunity costs will increase
C) opportunity costs will decrease
D) inventory carrying costs will increase

Question

Quizplus · Accepted Answer

As the manufacturing cycle increases, it means that products or materials are staying in inventory for a longer period of time, which increases inventory carrying costs. Sunk costs are costs that have already been incurred and are not affected by the change in manufacturing cycle, so A is incorrect. Opportunity costs are the potential benefits missed out on by choosing one option over another, and as the manufacturing cycle increases, there may be missed opportunities for sales or production of other products, so B is the best choice. C is incorrect because as the manufacturing cycle increases, the potential for missed opportunities (i.e. opportunity costs) increases, rather than decreases.

When Manufacturing Cycle Increases, ________