Question

. Nestle Co. paid $130,000 for a machine used to mill oats. The annual contribution margin from oat sales is $60,000. The machine could be sold for $80,000. The opportunity cost of producing the oats is ________. Question 20 options: $130,000 $0 $80,000 $20,000 $60,000

Answer 1

Answer:$80,000

Explanation:

Opportunity cost refers to an alternative forgone that is  the value one could have received but  declined  to take the next best alternative according to his or her preference.

Here , Nestle has two choices to make, it can  decide to produce oats or sell the machine, but taking the option of producing oats leaves the option of selling the machine at $80,000 as the Opportunity cost.