First Ledger Inc.,an auditing company,replaced its existing accounting software with new accounting software from another supplier.Since the new software has different features and abilities,First Ledger Inc.has had to spend $10,000 on training its employees to use it.In this scenario,$10,000 represents First Ledger Inc.'s
A) opportunity cost.
B) switching cost.
C) octroi charge.
D) excise duty.

Question

Quizplus · Accepted Answer

In this scenario, $10,000 represents First Ledger Inc.'s switching cost. Switching costs are incurred by moving from one supplier to another. Changing vendors may require the buyer to alter product specifications, retrain employees, and/or modify existing processes.