opportunity cost and accounting cost difference
Answer (1)
11th Mar, 2021
Hello,
When economists refer to the “opportunity cost” of a resource, they mean the value of the next-highest-valued alternative use of that resource. If, for example, you spend time and money going to a movie, you cannot spend that time at home reading a book, and you can't spend the money on something else.
- Someone gives up going to see a movie to study for a test in order to get a good grade. The opportunity cost is the cost of the movie and the enjoyment of seeing it. ... The opportunity cost of taking a vacation instead of spending the money on a new car is not getting a new car.
- Opportunity costs represent the potential benefits an individual, investor, or business misses out on when choosing one alternative over another.
Now accounting cost:
- Cost accounting involves determining fixed and variable costs. Fixed costs are expenses that recur each month regardless of the level of production. Examples include rent, depreciation, interest on loans and lease expenses.
Hope this helps!!!
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