Opportunity cost

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November 12, 2011 at 10:42 am #50448
neilsolaris
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I’m having difficulty understanding one of the answers in the BPP practice and revision kit, and wondered if someone could help explain it to me please.

It is regarding question 27 (Sniff limited, amended from December 07 exam). Part of the answer is entitled “opportunity cost of labour” . I understand the concept of opportunity cost, but they arrive at this cost by subtracting only material cost from revenue. Why do they not also subtract the labour cost too?
November 12, 2011 at 7:00 pm #89600
neilsolaris
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I’ve worked it out now! I would have added the incremental cost of labour to the opportunity cost of contribution foregone, but their way produces the same answer and is quicker.
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