Opportunity cost is the lost benefit that would have been gained as a result of not choosing the option.
To correctly estimate the opportunity costs, it is necessary to take into account the costs and benefits of each available option and compare them with others.
Accounting for the cost of opportunity costs can help individuals and organizations make better decisions.
Opportunity cost is strictly intrinsic cost used for strategic thinking; not included in accounting profit and excluded from external financial statements.
Examples of opportunity costs include investing in a new manufacturing plant in Los Angeles rather than Mexico City, choosing not to upgrade a company’s equipment, or choosing the most expensive product packaging option over cheaper options.