The Schmidt Corporation has in its inventory 4,000 damaged radios that cost $50,000.The radios can be sold in their present condition for $32,000,or repaired at a cost of $43,000 and sold for $66,000.What is the opportunity cost of selling the radios in their present condition?

Question

Quizplus · Accepted Answer

The opportunity cost of selling the radios in their present condition is the difference between the net benefit of repairing and selling them and the benefit of selling them as is. Repairing and selling them yields $66,000 - $43,000 = $23,000. Selling them as is yields $32,000. The opportunity cost is $23,000 - $32,000 = -$9,000, which means a $23,000 gain is forgone by not repairing.

The Schmidt Corporation Has in Its Inventory 4,000 Damaged Radios