Chocolate Company paid $200,000 for a machine used to produce chocolate. The annual contribution margin from chocolate sales is $100,000. The machine could be sold for $125,000. The opportunity cost of producing the chocolate is . g

$125,000.

Explanation:

The opportunity cost is the cost of the alternative forgone.

This is also known as the real cost. Due to the limited resources available to meet unlimited wants, choices have to be made with some alternatives left unsatisfied.

Such unsatisfied wants are the real cost of the wants satisfied.

Hence in this case, the amount that would have been received if the machine was sold and no chocolates were produced is the opportunity cost for producing chocolates.

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