Management of Childers Corporation Is Considering Whether to Purchase a New

question 113

Multiple Choice

Management of Childers Corporation is considering whether to purchase a new model 380 machine costing $278,000 or a new model 230 machine costing $207,000 to replace a machine that was purchased 3 years ago for $266,000. The old machine was used to make product R16K until it broke down last week. Unfortunately, the old machine cannot be repaired. Management has decided to buy the new model 230 machine. It has less capacity than the new model 380 machine, but its capacity is sufficient to continue making product R16K.
Management also considered, but rejected, the alternative of simply dropping product R16K. If that were done, instead of investing $207,000 in the new machine, the money could be invested in a project that would return a total of $305,000.
In making the decision to invest in the model 230 machine, the opportunity cost was:

• A)$278,000
• B)$305,000
• C)$207,000
• D)$266,000

---

Definitions:

Nielson Media Research

A company that measures and analyzes television, radio, and internet audience sizes and demographics.

Obsessed

A state of being excessively preoccupied with someone or something, leading to compulsive behavior or thoughts.

Behind Bars

A phrase meaning to be imprisoned or incarcerated.

Mild Sanctions

Penalties or measures that are not severe or harsh, intended to enforce compliance with laws or regulations without causing significant harm or distress.