Accounting Dictionary - Letter O

A B C D E F G H I J K L M N O P Q R S T U V W X Y Z
Opportunity cost
is the lost benefit of one course of action that a company encounters because another course of action was chosen. For example, a company can use its equipment to manufacture a product and earn a $10,000 profit. If the company instead decides to rent the equipment and earn $15,000, then the $10,000 that could have been earned by manufacturing the product is an opportunity cost.
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