The Opportunity Cost of Using One Unit of the Constrained

question 9

Multiple Choice

The opportunity cost of using one unit of the constrained resource in a volume trade-off decision is equal to:

• A)the profitability index for the company's most profitable existing product.
• B)the profitability index for the company's least profitable product-even if none of the product is currently being made.
• C)the profitability index for the product whose production would be cut back if necessary.
• D)the profitability index of the product with the greatest sales.

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Definitions:

Residual Value

The approximated value of an asset at the conclusion of its period of utility.

Depreciation

Systematically dividing the cost of a tangible asset across the years it is expected to last.

Capital Expenditures

Money invested by an enterprise to procure, upgrade, and preserve solid assets, such as premises, industrial structures, or equipment.

Fixed Asset Turnover Ratio

A financial metric that measures a company's ability to generate net sales from fixed assets like property, plant, and equipment.