Answer:
To determine what the Chief Executive Officer (CEO) would spend the authorized N100,000 on and calculate the opportunity cost, we would need more specific information about the company, its needs, and the available options. However, I can provide a general explanation of opportunity cost and give some examples of potential expenditures.
(i) What to spend it on?
The decision on how to spend the N100,000 would depend on the priorities, goals, and needs of the company. Some potential options for the CEO to consider might include:
Investment in Marketing: The CEO could allocate funds to marketing efforts such as advertising campaigns, digital marketing strategies, or market research to promote the company's products or services and attract new customers.
Equipment or Technology Upgrades: The CEO might choose to invest in upgrading or purchasing new equipment, tools, or technology systems that can improve operational efficiency, productivity, or the quality of products or services.
Employee Training and Development: Investing in employee training programs or professional development opportunities can enhance employee skills, knowledge, and performance, leading to improved productivity and customer satisfaction.
Research and Development (R&D): Allocating funds to R&D activities can support innovation, product development, or process improvements, enabling the company to stay competitive or expand its product/service offerings.
Infrastructure or Facilities Improvement: The CEO could decide to invest in upgrading or expanding the company's physical infrastructure, such as office spaces, manufacturing facilities, or warehouse facilities, to accommodate business growth or improve operational capabilities.
These are just a few examples, and the actual decision on how to allocate the funds would depend on the company's specific circumstances, industry, strategic objectives, and available opportunities.
(ii) What is the opportunity cost of item(s) purchased?
The opportunity cost refers to the value of the best alternative foregone when a particular choice is made. In this case, the opportunity cost would be the value or benefits that could have been gained by using the N100,000 for an alternative purpose.
For example, if the CEO chooses to spend the N100,000 on marketing efforts, the opportunity cost might be the potential benefits or investments that could have been made in employee training or equipment upgrades instead. By choosing one option, the CEO is forgoing the potential advantages of the other options.
It's important to note that the opportunity cost is subjective and depends on the specific circumstances and alternatives available. The CEO would need to carefully evaluate the potential benefits, costs, and trade-offs of different options before making a decision and assessing the opportunity cost associated with it.