The opportunity cost of transferring an item internally is the contribution to profit that the selling segment foregoes by transferring the item internally.

Question

Quizplus · Accepted Answer

Opportunity cost refers to the value of the next best alternative that is sacrificed or foregone in order to pursue a certain action or decision. In the context of transferring an item internally, the opportunity cost is the potential contribution to profit that the selling segment gives up by transferring the item to the buying segment, instead of selling it to an external customer. Therefore, the statement is true.

The Opportunity Cost of Transferring an Item Internally Is the Contribution