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Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA PM Exams › Chapter 9 -ST Decision Making
Good evening John
i am reading page 40 and having difficulty in understanding what an opportunity cost is.
could you please provide me with a further example that explains what this cost is
thanks
An opportunity cost is lost income as a result of doing the contract.
For example, suppose taking on a contract will mean that we lose $100 of income that we are currently receiving elsewhere. Doing the contract is therefore costing us $100. We call this an opportunity cost.
(There is a free lecture on relevant costing included in the list of revision lectures for F5 – you will find it useful.)