In Which of the Following Cases Would It Most Likely

question 272

Multiple Choice

In which of the following cases would it most likely be appropriate to use the WACC that relates to existing operations?

• A) A pizza delivery service is planning to expand by adding a sit-down pizza restaurant.
• B) A grocery store owner is considering adding a bakery and a delicatessen to his store.
• C) A gas tank manufacturer is contemplating switching to manufacturing tie-outs for dogs.
• D) A gas station owner is considering adding a convenience store.
• E) A manufacturer of garbage bags is considering expanding production capacity to meet increasing demand.

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Definitions:

Indirect Cost

Costs that are not directly accountable to a cost object (such as a particular project, facility, or product).

Direct Cost

Expenses that can be directly attributed to the production of specific goods or services, such as raw materials and labor.

Opportunity Cost

The expense incurred from skipping the next most favorable choice when a decision is made.

Tuition Expenses

Tuition expenses are the fees charged for instruction and training, typically at educational institutions such as colleges or universities.