11) A proposed project will require the use of ten machines in a company. Each machine has five alternative uses. What is the simplest way to evaluate the desirability of the project?
A) incremental analysis
B) cost-volume-profit analysis
C) opportunity cost approach
D) scarce resource approach
12) The key to determining the financial difference between two alternative courses of action is to identify the ________.
A) opportunity cost of each alternative
B) marginal cost
C) differential costs and revenues
D) joint cost of both alternatives
13) The term opportunity cost applies to a resource that a company ________.
A) is thinking about purchasing
B) already owns only
C) has committed to purchase only
D) already owns or has committed to purchase
14) An opportunity cost is ________.
A) the additional costs generated by a proposed alternative
B) the difference in total cost between two alternatives
C) a cash disbursement in the future
D) the maximum available benefit foregone by using a resource for a particular purpose instead of the best alternative use
15) The salary foregone by a person who quits a job to start a business is an example of a(n) ________.
A) sunk cost
B) opportunity cost
C) depreciable cost
D) outlay cost
16) Nestle Company 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 ________.
17) Sue is considering leaving her current position to open a coffee shop. Sue's current annual salary is $83,000. Annual coffee shop revenue and costs are estimated at $260,000 and $210,000, respectively. What is Sue's opportunity cost of staying at her current work position?
18) Mary is considering leaving her current position to open an ice cream shop. Mary's current annual salary is $77,000. Annual ice cream shop revenue and costs are estimated at $260,000 and $210,000, respectively. What is Mary's annual opportunity cost of starting the ice cream shop?
19) Determining the opportunity cost of a project depends on the alternatives available.
20) Opportunity costs and outlay costs are widely used synonyms.