What is the opportunity cost of making a component part in a factory with no excess capacity?
A) Variable manufacturing cost of the component.
B) Fixed manufacturing cost of the component.
C) Cost of the production given up in order to manufacture the component.
D) Net benefit foregone from the best alternative use of the capacity required.

Question

Quizplus · Accepted Answer

The opportunity cost of making a component part in a factory with no excess capacity is the net benefit foregone from the best alternative use of the capacity required. This means that the best alternative use of the capacity needs to be considered and the potential benefits forgone in order to manufacture the component need to be taken into account. Therefore, the answer is D.

What Is the Opportunity Cost of Making a Component Part