US CMA Part 2 · Chapter 6 · Question 2 of 22
A company could rent an empty warehouse to another business for $8,000 per month. Instead it plans to use the warehouse to store a new product line. In evaluating the product line, the $8,000 per month is best described as:
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: D) An opportunity cost that is relevant to the decision
Explanation
An opportunity cost is the benefit forgone by choosing one alternative over the next best one. By using the warehouse for the new line, the company gives up $8,000 of monthly rental income, so this amount is a relevant cost of the new product line even though no cash is paid.
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