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 the oats is ________.
A) $20,000
B) $60,000
C) $80,000
D) $130,000

Question

Quizplus · Accepted Answer

The opportunity cost is the cost of the next best alternative foregone, which in this case is the machine's resale value. 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