Which of the following best describes an opportunity cost: Select one: a. it is a relevant cost in decision making, but is not part of the traditional accounting records. b. it is not a relevant cost in decision making, but is part of the traditional accounting records. c. it is a relevant cost in decision making, and is part of the traditional accounting records. d. it is not a relevant cost in decision making, and is not part of the traditional accounting records.

Question

Business

Evony

11 August, 17:24

Which of the following best describes an opportunity cost: Select one: a. it is a relevant cost in decision making, but is not part of the traditional accounting records. b. it is not a relevant cost in decision making, but is part of the traditional accounting records. c. it is a relevant cost in decision making, and is part of the traditional accounting records. d. it is not a relevant cost in decision making, and is not part of the traditional accounting records.

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Alexzander Key · Answer 1

a. it is a relevant cost in decision making, but is not part of the traditional accounting records.

Explanation:

An opportunity cost is a relevant cost in decision making, but is not part of the traditional accounting records.

The opportunity cost also known as the alternative forgone in accounting and can be defined as the potential benefit that is forgone when an alternative is selected over another.

For instance, the money and time you spend to go see a movie at the cinema, you can't spend the time reading a book at home and the money can't be spent on something else either.

The opportunity cost can be calculated by using the formula;

Opportunity cost (OC) = FO - CO

where:

FO = Return on alternative forgone.

CO = Return on the option chosen.