Managers should generally consider opportunity costs in both "keep or drop" and "make or buy" decisions. Which of the following is an opportunity cost they should consider in both situations?
A)Avoidable fixed costs
B)Benefits from alternate uses of released capacity
C)Amortization on new machinery
D)Market share

Question

Quizplus · Accepted Answer

In both "keep or drop" and "make or buy" decisions, managers should consider the opportunity cost of potential benefits from alternate uses of released capacity. For example, if a company decides to drop a product line, they may be able to allocate resources towards a more profitable product line. Similarly, if a company decides to outsource a component, they may be able to utilize internal resources for other projects. Avoidable fixed costs and amortization on new machinery are specific to the "make or buy" decision, while market share is more relevant to the "keep or drop" decision.

Managers Should Generally Consider Opportunity Costs in Both "Keep or Drop