COST ACCOUNTING
INFORMATION FOR DECISION MAKING
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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the profit of the next best alternative foregone
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the additional (incremental) cost of accepting the order
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the additional revenue if we do not drop the product.
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Detailed explanation-1: -Opportunity cost is defined as the cost of the next best alternative foregone. It represents the sacrifices that people must make due to the scarcity of resources.
Detailed explanation-2: -Opportunity cost is the value of the best opportunity forgone in a particular choice. It is not simply the amount spent on that choice. The concepts of scarcity, choice, and opportunity cost are at the heart of economics. A good is scarce if the choice of one alternative requires that another be given up.
Detailed explanation-3: -Opportunity cost refers to what you have to give up to buy what you want in terms of other goods or services. When economists use the word “cost, ” we usually mean opportunity cost.
Detailed explanation-4: -The cost of the next best alternative foregone is termed as opportunity cost.
Detailed explanation-5: -Key Takeaways Opportunity cost is the forgone benefit that would have been derived from an option not chosen. To properly evaluate opportunity costs, the costs and benefits of every option available must be considered and weighed against the others.