Question

View previste 11 TB MC Qu. 1-262 Management of Plascencia Corporation is considering ... 4 points 012727 Management of Plascencia Corporation is considering whether to purchase a new model 370 machine costing $531,000 or a new model 220 machine costing $444,000 to replace a machine that was purchased 10 years ago for $477,000. The old machine was used to make product 1431 until it broke down last week. Unfortunately, the old machine cannot be repaired. Management has decided to buy the new model 220 machine. It has less capacity than the new model 370 machine, but its capacity is sufficient to continue making product 143L. Management also considered, but rejected, the alternative of simply dropping product 143L. If that were done, instead of Investing $444,000 in the machine, the money could be invested in a project that would return a total of $458,000. In making the decision to invest in the model 220 machine, the opportunity cost was: Multiple Choice $444,000 $531,000

Answer 1

Solution: The opportunity cost is Amount from next best alternative Option. In this case invested in a project is Opportunity cost i.e., 458,000 * Kindly Comment down for any further clarifications/ queries and please upvote.