XYZ,Inc.is considering adding a product line that would utilize unused floor place of their manufacturing plant.The floor space would be considered a(n):
A)variable cost.
B)opportunity cost.
C)sunk cost.
D)irrelevant cash flow.

Question

Quizplus · Accepted Answer

The floor space is not currently generating any revenue for the company, so it can be considered an opportunity cost. This means that by using the space for a new product line, the company is giving up the opportunity to use the space for another purpose. The cost is not sunk, as it is still an available resource for the company. It is also not a variable cost or an irrelevant cash flow, as it directly affects the company's decision to add the new product line.

XYZ,IncIs Considering Adding a Product Line That Would Utilize Unused