Vident Ltd has 1,000 commercial frozen ice machines in inventory produced at a cost of $4,000 each (60% variable and 40% fixed). The machines were to have been sold for $10,000 each. However, the machines currently contain a minor malfunction, reducing their selling price to $1,500 each. The company could correct the malfunction at a variable cost of $2,500 each, and then sell the machines for $5,500 each. For purposes of determining whether the machines should be reworked, what is the opportunity cost per unit?
A) $1,500
B) $2,500
C) $2,400
D) $4,000

Question

Quizplus · Accepted Answer

The opportunity cost per unit is the current selling price of $1,500, which is what the company would forego if they decide to rework the machines.

Vident Ltd Has 1,000 Commercial Frozen Ice Machines in Inventory