QUESTION 19 The potential benefits lost by taking a specific action when two or more alternative choices are available is known as an): A. Out-of-pocket cost. B. Sunk cost C. Alternative cost. D. Opportunity cost. QUESTION 20 A company paid $200,000 ten years ago for a specialized machine that has no salvage value and is being depreciated at the rate of $10,000 per year. The company is considering using the machine in a new project that will have incremental revenues of $28,000 per year and annual cash expenses of $20,000. In analyzing the new project, the $200,000 original cost of the machine is an example of an): A Variable cost. B. Opportunity cost. C. Out-of-pocket cost. D. Sunk cost. QUESTION 21 Minor Electric has received a special one-time order for 1,500 light fixtures (units) at $5 per unit. Minor currently produces and sells 7,500 units at $6.00 each. This level represents 75% of its capacity. Production costs for these units are $4.50 per unit, which includes $3.00 variable cost and $1.50 fixed cost. Total fixed costs will not be affected by this special order. Should the company accept the special order? A. No, because net income would decrease by $1,500. B. No, because net income would decrease by $3,000. C. Yes, because net income would increase by $750. D. Yes, because net income would increase by $3,000. QUESTION 22 Gordon Corporation inadvertently produced 10,000 defective digital watches. The watches cost $8 each to produce. A salvage company will purchase the defective units as they are for S3 each. Gordon's production manager reports that the defects can be corrected for $5 per unit, enabling them to be sold at their regular market price of $12.50. Gordon should: A. Sell the watches for $3 per unit. B. Correct the defects and sell the watches at the regular price. C. Sell 5,000 watches to the salvage company and repair the remainder D. Sell the watches as they are because repairing them will cause their total cost to exceed their selling price