Nick is a computer technician who works from his own home and charges $75 per hour. He
Question:
Nick is a computer technician who works from his own home and charges $75 per hour. He works 25 days a month for an average of 6 hours a day. Recently, a computer company offered Nick a job with a monthly salary $7,500. If Nick accepts the job, he could still work for two hours every evening (for 25 days per month) repairing computers; however, Nick will reduce his fee from $75 per hour to $50 per hour if he accepts the job. Of course, Nick can continue doing what he does and reject the offer.
Required:
a. Identify the three options that Nick faces.
b. Calculate the income from each option.
c. Treating the income from each option as the value of that option, determine the opportunity cost of each option.
Opportunity CostOpportunity cost is the profit lost when one alternative is selected over another. The Opportunity Cost refers to the expected returns from the second best alternative use of resources that are foregone due to the scarcity of resources such as land,...
Step by Step Answer:
Managerial Accounting
ISBN: 978-1118385388
2nd edition
Authors: Ramji Balakrishnan, Konduru Sivaramakrishnan, Geoff B. Sprinkle