The opportunity cost of making a component part in a factory with no excess capacity is the:
A)variable manufacturing cost of the component.
B)fixed manufacturing cost of the component.
C)total manufacturing cost of 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 by using the factory's capacity to make the component, the company is giving up the potential benefits that could have been gained by using the same capacity for some other purpose. Therefore, the opportunity cost is the potential benefits foregone from the best alternative use of the factory's capacity.

The Opportunity Cost of Making a Component Part in a Factory