Riverview Lumber Company incurs variable costs of $25.00 per unit in producing its standard deck chair, which it sells for $60.00 per unit. Alternatively, Riverview can produce and sell deluxe model deck chairs at a price of $74.00 per unit. Deluxe model variable costs are $36.00 per unit. If Riverview decides to produce deluxe model deck chairs, the company will have to lease additional equipment at a cost of $25,000 per month. Riverview's existing fixed costs are $138,000 per month. In the context of Riverview's decision to produce standard or deluxe model deck chairs, the $25,000 equipment lease is an example of a(n): O sunk cost O variable cost O avoidable fixed cost O future cost that will not differ between the alternative courses of action O opportunity cost
Riverview Lumber Company incurs variable costs of $25.00 per unit in producing its standard deck chair, which it sells for $60.00 per unit. Alternatively, Riverview can produce and sell deluxe model deck chairs at a price of $74.00 per unit. Deluxe model variable costs are $36.00 per unit. If Riverview decides to produce deluxe model deck chairs, the company will have to lease additional equipment at a cost of $25,000 per month. Riverview's existing fixed costs are $138,000 per month. In the context of Riverview's decision to produce standard or deluxe model deck chairs, the $25,000 equipment lease is an example of a(n): O sunk cost O variable cost O avoidable fixed cost O future cost that will not differ between the alternative courses of action O opportunity cost
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Subject :- Accounting
Transcribed Image Text:Riverview Lumber Company incurs variable costs of $25.00 per unit in producing its standard deck chair, which it sells for $60.00 per unit. Alternatively, Riverview
can produce and sell deluxe model deck chairs at a price of $74.00 per unit. Deluxe model variable costs are $36.00 per unit. If Riverview decides to produce deluxe
model deck chairs, the company will have to lease additional equipment at a cost of $25,000 per month. Riverview's existing fixed costs are $138,000 per month.
In the context of Riverview's decision to produce standard or deluxe model deck chairs, the $25,000 equipment lease is an example of a(n):
Osunk cost
O variable cost
O avoidable fixed cost
O future cost that will not differ between the alternative courses of action
O opportunity cost
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