Kragle Ltd manufacturers a number of specialised electronic components, including the advanced X1000. Kragle Ltd has the capacity to produce 10 000 units of X1000 per year. Currently it is operating at 80 per cent capacity. The selling price for X1000 is $100 per unit. The variable cost per unit is $30. Fixed cost allocated to producing X1000 is $200 000 per year. Kragle Ltd receives a special order for 2000 units of X1000. The opportunity cost associated with taking this special order is:

Question

Quizplus · Accepted Answer

The opportunity cost associated with taking this special order is $0 because Kragle Ltd is currently operating at 80% capacity, producing 8,000 units (80% of 10,000). The special order for 2,000 units can be fulfilled without exceeding the total capacity of 10,000 units, meaning there is no forgone revenue or additional cost from displacing other production.

Kragle Ltd Manufacturers a Number of Specialised Electronic Components, Including