Mueller Has Been Approached About Providing a New Service to Its

question 17

Multiple Choice

Mueller has been approached about providing a new service to its clients. The company will bill clients $140 per hour; the related hourly variable and fixed operating costs will be $75 and $18, respectively. If all employees are currently working at full capacity on other client matters, the per-hour opportunity cost of being unable to provide this new service is:

• A) $0.
• B) $47.
• C) $65.
• D) $93.
• E) $140.

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Definitions:

Liability

A present obligation of the entity to transfer an economic resource as a result of past events.

Equity

The value of an owner's interest in a property or business, after subtracting liabilities.

Financial Asset

An asset that derives value from a contractual claim, such as cash, ownership interest in an enterprise, a bond, stock, or right to receive cash from a contract.