Marianne Company Has an Idle Machine That Originally Cost $200,000

question 47

Multiple Choice

Marianne Company has an idle machine that originally cost $200,000.The book value of the machine is $100,000.The company is considering three alternative uses of the idle machine:
Alternative 1: Disposal of machine.Disposal value of machine is $50,000.
Alternative 2: Use the idle machine to increase production of Product A.Contribution margin from additional sales of Product A is estimated to be $60,000.
Alternative 3: Use the idle machine to increase production of Product B.Contribution margin from additional sales of Product B is estimated to be $70,000.
When considering Alternative 2,what is the opportunity cost of the idle machine?

• A) $50,000
• B) $60,000
• C) $70,000
• D) $110,000

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Definitions:

General Merchandise Store

A retail establishment offering a wide range of products across different categories, typically without a specialty focus.

Specialty Outlets

Retail stores that focus on selling a specific category of products, offering expert knowledge and a wider selection within that category.

General Merchandise Stores

Retail establishments offering a wide range of consumer goods in various categories from clothing to home appliances.

Scrambled Merchandise Stores

Retail stores that stock and sell a wide variety of unrelated products, often at discounted prices.