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:

Herding

The practice of raising and managing groups of domesticated animals, often large herds of livestock, moved from place to place to graze on pasture.

Fishing

The act of catching fish from water bodies like rivers, lakes, or the ocean, either for sustenance, sport, or commercial purposes.

Foraging

The act of searching wide areas for food or provisions, typical of hunter-gatherer societies.

BPA Chemical Compounds

Bisphenol A (BPA) is an industrial chemical compound used in manufacturing plastics and epoxy resins, often found in containers that store food and beverages.