Heston and Burton, CPAs, currently work a five-day week. They estimate that net income for the firm would increase by $75,000 annually if they worked an additional day each month. The cost associated with the decision to continue the practice of a five-day work week is an example of:
A) differential revenue
B) sunk cost
C) differential income
D) opportunity cost

Question

Quizplus · Accepted Answer

The cost associated with the decision to continue the practice of a five-day work week is an opportunity cost - the potential net income that would be lost by not working an additional day each month. This is because the firm could earn an additional $75,000 annually by working one more day per month. The other answer options (differential revenue, sunk cost, and differential income) do not accurately describe the cost associated with this decision.

Heston and Burton, CPAs, Currently Work a Five-Day Week