This post addresses the BMEW concrete pad scenario.
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Beddingfield Machine and Electronic Works (BMEW), spent $85,000 last year pouring a concrete pad adjacent to their central machine shop in order to park 18-wheel trailers that they had hoped to begin repairing last year for Peden Trucking under a new contract.
In the fall Peden Trucking declared bankruptcy and closed it's doors after having only sent two trailers to BMEW for repair.
This year BMEW is considering expanding the size of their machine shop over the concrete pad in question and is comparing quotes from three construction firms. In regards to this new venture, what would the initial cost of the concrete pad be considered as?
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This solution addresses the following scenario:
Beddingfield Machine and Electronic Works (BMEW), spent $85,000 last year pouring a concrete pad adjacent to their central machine shop in order to park 18-wheel trailers that they had hoped to begin repairing last year for Peden Trucking under a new contract.
In the fall Peden Trucking declared bankruptcy and closed it's doors after having only sent two trailers to BMEW for repair.
This year BMEW is considering expanding the size of their machine shop over the concrete pad in question and is comparing quotes from three construction firms. In regards to this new venture, what would the initial cost of the concrete pad be considered as?
Solution Preview
It's an opportunity cost, which is when we're taking into account all alternatives. The reason why it's an opportunity cost is because we could do one of two things with this pad: we could leave it open and ...
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