If the required rate of return is 12% and the per unit cost of units purchased is $35, then the relevant opportunity cost of capital will be ____________?
Correct answer: B. $4.20
- A. $6.20
- B. $4.20
- C. $7.20
- D. $5.20
Explanation
Opportunity cost of capital per unit is calculated as the required return multiplied by the unit cost: 12% × $35 = $4.20. This represents the return forgone by investing in that inventory.
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About Cost Accounting
Cost accounting measures and analyses the cost of producing goods or providing services for planning, control and pricing decisions. It covers direct and indirect costs, fixed and variable costs, job and process costing, break-even analysis, marginal costing, overhead allocation, and the difference between product cost and period cost.
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