An organization has two different solutions to grow its business. One project is worth $375,000 to the organization. The second project is worth $565,000 to the business. The organization can only do one of the projects and elects to do the second project for $565,000. What is the opportunity cost of this decision?
A) $190,000
B) $565,000
C) $375,000
D) $940,000

Question

An organization has two different solutions to grow its business. One project is worth $375,000 to the organization. The second project is worth $565,000 to the business. The organization can only do one of the projects and elects to do the second project for $565,000. What is the opportunity cost of this decision?
A) $190,000  
B) $565,000
C) $375,000
D) $940,000

Quizplus · Accepted Answer

The opportunity cost is the whole amount of the opportunity that can be seized. In this instance, the opportunity cost is $375,000, as this is the project that the organization can't do. Answer: B is incorrect. This answer is the value of the project the organization has elected to do. Answer: A is incorrect. $190,000 is the difference between the two projects and does not reflect the opportunity cost. Answer: D is incorrect. This is the value of both projects combined and does not represent the opportunity cost.

An Organization Has Two Different Solutions to Grow Its Business