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

question 78

Multiple Choice

Nancy 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 the opportunity cost of the idle machine,what is the net financial benefit from Alternative 3?

• A) $10,000
• B) $20,000
• C) $50,000
• D) $70,000

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