Question

. Nestle Co. paid $130,000 for a machine used to mill oats. The annual contribution margin from oat sales is $60,000. The machine could be sold for $80,000. The opportunity cost of producing the oats is ________. Question 20 options: $130,000 $0 $80,000 $20,000 $60,000

Answer 1

The opportunity cost of producing oats with the machine is $80,000, which is the amount the machine could be sold for instead of milling oats.

Step-by-step explanation:

The opportunity cost of producing the oats using Nestle Co.'s machine is the next best alternative foregone by not selling the machine, which is $80,000. This figure represents the amount the machine could be sold for, which is the potential income that Nestle is sacrificing in order to use the machine for milling oats. The purchase cost of $130,000 or the annual contribution margin from oat sales of $60,000 is not the opportunity cost in this scenario because opportunity cost is concerned with the value of the best alternative use of a resource.

Answer 2

Answer:$80,000

Step-by-step explanation:

Opportunity cost refers to an alternative forgone that is the value one could have received but declined to take the next best alternative according to his or her preference.

Here , Nestle has two choices to make, it can decide to produce oats or sell the machine, but taking the option of producing oats leaves the option of selling the machine at $80,000 as the Opportunity cost.