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 damaged radios in their present condition is the potential profit that could be earned if they were repaired and sold.

If the damaged radios are sold as-is, the company will receive $32,000. However, if they are repaired at a cost of $43,000 and sold for $66,000, the profit would be $23,000 ($66,000 - $43,000).

Therefore, the opportunity cost of selling the damaged radios in their present condition is $23,000.

The best choice would be to repair the radios and sell them for a profit of $23,000, as this would result in a higher return on investment compared to selling them as-is.

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