Question

If Company Xhas the option of leasing some factory space to Company Y or utilizing it for another product line, then how should Company X handle the lost lease payments on the factory space if it chooses the product line?

A) Ignore it.
B) Include it as an opportunity cost.
C) Include half of it as additional revenue for the project.
D) None of the above.

Answer 1

When Company X chooses to utilize the factory space for another product line instead of leasing it to Company Y, it should include the lost lease payments as an opportunity cost.

Step-by-step explanation:

When Company X chooses to utilize the factory space for another product line instead of leasing it to Company Y, it should include the lost lease payments as an opportunity cost. This is because the company is forgoing the potential revenue it could have earned from the lease payments. Including it as an opportunity cost allows the company to account for the financial impact of choosing the product line over leasing the space.