An opportunity cost that a business might face is?

a.forgoing the interest that the owners could have earned on their savings if they had not invested their savings in the business


b.forgoing rental income to be earned if the business rented out its building


c.forgoing the salaries the owners would have received at other jobs


d.all of the above

An opportunity cost that a business might face is?
Funny how education works, we just got done learning about this in accounting 102. anytime you stand to lost money by taking another offer is an opportunity cost. If I could save money by not chosing plan B and staying with plan A, chosing plan B would give me a COST of OPPORTUNITY. Pretty simple. "D" all of the above.
Reply:All of the above.





From InvestorWords.com: Opportunity cost is the cost of passing up the next best choice when making a decision. For example, if an asset such as capital is used for one purpose, the opportunity cost is the value of the next best purpose the asset could have been used for. Opportunity cost analysis is an important part of a company's decision-making processes, but is not treated as an actual cost in any financial statement.





Larry (CPA)
Reply:The answer is D. Anytime you forego anything in the favor of something else is an opportunity cost, even if you are foregoing something of little value in favor of something of much greater value.





If I forego the value of a $500 Porsche in order to buy a Datsun for $800 (the reason is irrelevant), that reflects an opportunity cost.