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opportunity cost

This topic has 1 reply, 2 voices, and was last updated 1 year ago by John Moffat.

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January 6, 2022 at 6:14 pm #645411
Anonymous
Inactive
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Sir somebody asked you earlier that if the material in inventory has not been in regular use then the relevant cost is opportunity cost.
You said that opportunity cost is the net incremental cash flows but I do like to know how can we calculate net incremental cash flow?
January 7, 2022 at 9:24 am #645446
John Moffat
Keymaster
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An opportunity cost is the lost income. So if material that is not in regular use is taken to use on a new contract then they are losing the amount that they could have received by selling the material as scrap.
Have you watched my free lectures on relevant costing?
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