- CFA Exams
- Forums
- General Forum
- Topic: Can anyone answer me a question about opportunity cost?
| Author | Topic: Can anyone answer me a question about opportunity cost? |
|---|---|
| bloomberg @2009-04-01 12:46:37 |
Can anyone take a look on this question? Four years ago a company bought a $1 million machine with an estimated useful life of 10 years. For accounting purposes, the machine is being depreciated in the amount of $100,000 annually. The machine is used to manufacture a particular product and has no alternative use of scrap value. The annual revenue generated from operating the machine is $650 000 and the annual cost of the factors of production, other than deprecation, employed to generate that revenue is #600 000. Should the company continue to operate the machine? A. Yes B. No, because the machine is being operated at a net loss C. No, because the opportunity cost of operating the machine is zero |
| vtom2009 @2009-04-02 03:45:48 |
Yes, why not? CF is positive... |
| cfahitman @2009-04-07 07:42:15 |
but 650K - 600K - 100K is -50K. shouldn't it be a loss (B)?? im not 100% sure. |
