Management of Sourwine Corporation Is Considering Whether to Purchase a New

question 69

Multiple Choice

Management of Sourwine Corporation is considering whether to purchase a new model 320 machine costing $389,000 or a new model 280 machine costing $318,000 to replace a machine that was purchased 6 years ago for $376,000. The old machine was used to make product C78P until it broke down last week. Unfortunately, the old machine cannot be repaired.
Management has decided to buy the new model 280 machine. It has less capacity than the new model 320 machine, but its capacity is sufficient to continue making product C78P.
Management also considered, but rejected, the alternative of simply dropping product C78P. If that were done, instead of investing $318,000 in the new machine, the money could be invested in a project that would return a total of $405,000.
-In making the decision to invest in the model 280 machine, the opportunity cost was:

• A) $376,000
• B) $389,000
• C) $405,000
• D) $318,000

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Definitions:

Being a Company Man

A term used to describe an employee who is extremely loyal to their company, often to the extent of prioritizing the company's interests over personal ones.

Absenteeism

The frequent absence of an employee from work without valid reasons, which can negatively impact business operations.

Personnel Turnover

The rate at which employees leave an organization and are replaced by new hires.

Management Skills

The abilities and competencies that enable an individual to manage, direct, and guide others in a business or organizational context to achieve set goals.