opportunity cost vs relevant cost

twobytes · #1 Jan 4, 2005, 02:46 AM

I am confused between the two costs, opportunity cost and relevant cost. What's the relation between them and difference from each ? Can someone help to explain it? Thx.

ani_sargsyan · Apr 11, 2005, 12:29 AM

Quote:

Originally Posted by twobytes

I am confused between the two costs, opportunity cost and relevant cost. What's the relation between them and difference from each ? Can someone help to explain it? Thx.

Answer please !

reinsuranc · Apr 11, 2005, 02:12 PM

An opportunity cost is one which measures the cost of sacrificing one course of action in favour of another. If I play a video game rather mowing someone's lawn for a fee, the opportunity cost of the video game is the fee I chose not to earn.

A relevant cost or benefit is one that will be affected by the decision. Overhead is not relevant because it is incurred whether you make the decision or not.



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