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Opportunity costs are usually found in the organization’s general ledger and they are a type of...

Opportunity costs are usually found in the organization’s general ledger and they are a type of differential cost that must be explicitly considered in every decision a manager makes.

TRUE OR FALSE

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Expert Solution

Answer. Partly False,Partly true

Opportunity Cost are the cost or loss brone by organization because of opportunity forgone.Cost of benefit that the company might have derived by putting the resources in some other alternative.It is an economic indicator which helps the management to decide the best profitable course of action(decision making), it is not any kind of financial profit.

It is not recorded any where in company's books of accounts but only used by the management for internal use of decision making.

For example A company can invest Rs.1000000/- in any business as capital which it could have deposited as fixed deposit in any bank to earn interest.So the loss of interest to company on Rs.1000000 is an opportunity cost.

Management will take the decision accordingly which of the two alternative will fetch them higher revenues/profits, investing capital in business or earning interest on Fixed deposit.

Hence the statement that it is a type of differential cost that must be explicitly considered in every decision a manager takes is true but it is not found in organization's general ledger so this statment is false.

ekkarill92 answered 1 year ago
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