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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 ________.

A) $20,000

B) $60,000

C) $80,000

D) $130,000

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?

A) $50,000

B) $83,000

C) $210,000

D) $343,000

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?

A) $50,000

B) $77,000

C) $210,000

D) $260,000

19) Determining the opportunity cost of a project depends on the alternatives available.

20) Opportunity costs and outlay costs are widely used synonyms.

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