Question

What is the nature of an opportunity cost?   

1.It is a sunk cost.       

2.It is always variable.   

3.It is included as part of cost of goods sold.   

4.It is a potential benefit.

Answer 1

Answer: option 4. It is a potential benefit

Opportunity cost is a potential benefit meaning that profit/benefit lost due to selection of alternative over another..

Example of Opportunity cost:

Mr X currently having job and getting paid of $ 4,000 per month. Due to any reason he entered in Business and leave the job. So, in this case we can say that opportunity cost is $ 4000 per month. Where we can related, salary lost due to entered in Business.

Sunk Cost: It is incurred in past & can not recoverable & also not relevant for taking future decisions.

Opportunity Cost can not be always variable. it can be fixed in nature as well.

Opportunity Cost never accounted. Thus not consider in cost of goods sold.