TVA Limited has a set of 25 fencing panels. It plans to use these fencing panels to build a new fence for a customer. The invoice price for the new fence is £1,500. The fencing panels originally cost £400 but they could be sold today for £500. The cost of replacing the fencing panels is £450. What is the opportunity cost of these fencing panels?

Question

Quizplus · Accepted Answer

The opportunity cost is the value of the next best alternative that is foregone. In this case, the next best alternative is to sell the fencing panels for £500. Therefore, the opportunity cost of using the fencing panels to build the new fence is £500.

TVA Limited Has a Set of 25 Fencing Panels