The benefit which could have been earned but was given up by choosing the other option is called which cost?

The benefit which could have been earned but was given up by choosing the other option is called which cost?

• A. Relevant cost
• B. Incremental cost
• C. Controllable cost
• D. Opportunity cost

Answer: (D)

When you decide between options, the value of the best alternative you give up by choosing the other is called the opportunity cost. It represents the foregone benefit you could have earned if you had chosen differently, and it helps you weigh decisions by looking at what you sacrifice, not just what you spend. This is not a cash outlay or an actual expense you incur. It’s about the potential benefit you miss out on, which is why it’s central to decision making. For example, if you use capacity to produce one product, the profit you would have earned from producing the other product is the opportunity cost of that choice. Other terms describe different ideas: relevant costs are future costs that differ between options, incremental costs are the additional costs of one option over another, and controllable costs are costs a manager can influence. They’re useful for analysis, but they don’t capture the foregone benefit itself.

When you decide between options, the value of the best alternative you give up by choosing the other is called the opportunity cost. It represents the foregone benefit you could have earned if you had chosen differently, and it helps you weigh decisions by looking at what you sacrifice, not just what you spend.

This is not a cash outlay or an actual expense you incur. It’s about the potential benefit you miss out on, which is why it’s central to decision making. For example, if you use capacity to produce one product, the profit you would have earned from producing the other product is the opportunity cost of that choice.

Other terms describe different ideas: relevant costs are future costs that differ between options, incremental costs are the additional costs of one option over another, and controllable costs are costs a manager can influence. They’re useful for analysis, but they don’t capture the foregone benefit itself.