Which of the following is TRUE concerning opportunity costs?
A)They are incorporated into formal financial accounting reports.
B)They entail cash receipts.
C)They entail cash disbursements.
D)They require accounting journal entries.
E)They are relevant for the make/buy decision.

Question

Quizplus · Accepted Answer

Opportunity costs refer to the cost of the next best alternative forgone. It is not explicitly reflected in financial accounting reports as it does not involve cash receipts or disbursements. Opportunity cost is relevant in the make/buy decision where a firm has to choose between producing a good or service in-house or buying it from an external vendor.

Which of the Following Is TRUE Concerning Opportunity Costs