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Does reliance on historical cost rather than opportunity cost lead to a poor decision? Consider this example. A bakery has an inventory of wheat that

Does reliance on historical cost rather than opportunity cost lead to a poor decision? Consider this example. A bakery has an inventory of wheat that was purchased at $6 per bushel but now is worth $10 per bushel. The firm is considering using this wheat to make a new whole wheat bread that will be sold to stores for $10 per unit (six loaves). The selling price of the finished product remains the same when using either method. Suppose that one bushel of wheat is required to make each unit of this new type of bread while $3.00 of labor, energy, and other costs per unit of output are also incurred.

Choose the correct eight required items:

Price of finished product. Historical approach Answer 1Choose...3,6, 1,-3,1,0

Price of finished product. Economic approach

Answer 2Choose...3,6,1,-3,1,0
Cost of wheat input. Historical approach Answer 3Choose...3,6,1,-3,1,0

Cost of wheat input. Economic approach

Answer 4Choose...3,6,1,-3,1,0

Labor, energy, other. Historical approach

Answer 5Choose...3,6,1,-3,1,0

Labor, energy, other. Economic approach

Answer 6Choose...3,6,1,-3,1,0

Net profit per unit. Historical approach

Answer 7Choose...3,6,1,-3,1,0

Net profit per unit. Economic approach

Answer 8Choose...3,6,1,-3,1,0

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