AuthorTopic: 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.

CFA Discussion Topic: Can anyone answer me a question about opportunity cost?

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