Mueller has been approached about providing a new service to its clients. The company will bill clients $140 per hour; the related hourly variable and fixed operating costs will be $75 and $18, respectively. If all employees are currently working at full capacity on other client matters, the per-hour opportunity cost of being unable to provide this new service is:
A) $0.
B) $47.
C) $65.
D) $93.
E) $140.

Question

Quizplus · Accepted Answer

The opportunity cost is the contribution margin lost from not providing the new service, which is the billing rate minus the variable cost: $140 - $75 = $65.

Mueller Has Been Approached About Providing a New Service to Its