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OPPORTUNITY COST CALCULATION ??

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(Querist)
09 May 2011 i am solving problems from module. many a times i get stuck in opp. cost calculatin and my solution goes wrong. i have following doubts.

if suppose revenue from alternative option is Rs.500000 and costs are
direct wages ;100000
rawmaterial :50000
Rent :50000
power :50000
Depreciation :50000
overhead :50000

then what will be the opportunity cost ? Explainatin with logic will be highly appreciated.

waiting for your reply ?
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Amit Agrawal

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Amit Agrawal (Expert)
10 May 2011 alternate revenue 500000
cost (350000) in your case
profit 150000

this alternate profit known as opportunity cost and in your case it is 150000/-

simple words opportunity cost means foregoing of profit from alternate option due to selection of underlying option.

in your case if you select underlying option than alternate profit that would be coming if alternate option availed will not be come hence it is your opportunity cost.
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