It is necessary to determine the net cash loss of the organization in order to calculate the opportunity cost. Losses of cash cannot be measured in absolute units of capital, unlike other resources, but these costs depend on the alternative. If the organization has capital in excess of its needs, then the opportunity cost of the company will be equal to the high rates of return on external investment and the rate of return with equivalent risk.
Instructions
Step 1
Any manufacturer seeks to increase the profit of the enterprise, but opportunity costs are the main obstacle in realizing the opportunities for maximizing profits. In the event that the management of the company does not use capital funds and does not receive a rate of return on external investment that exceeds the rate of return received by investors elsewhere, then the funds are distributed among the shareholders. As a result of the best alternative opportunity, the rate of return obtained by the company's investors does not exceed the minimum required rate of return on investment.
Step 2
Some costs cannot be accounted for in the accounting system. The costs accounted for by the system should be based on past obligations to pay in the future. These are the costs that are called valid, since they are recorded by the accounting system.
Step 3
However, in order to make decisions, you should take into account all costs that are not directly recorded in the accounts. These costs are called opportunity costs or time. That is, these costs are costs that measure the profit that is sacrificed or lost as a result of choosing an option, and when other options have to be abandoned.
Step 4
Opportunity cost, not attributable to capital, can only be considered when it comes to scarce resources, such as constraints in materials, equipment or labor. When resources are not scarce, then they cannot be allocated in favor of any other option.
Step 5
To calculate the time costs of a company, for each factor introduced in production, estimate the profit lost by the enterprise when using the resource not in the best way, but in the nearest, in monetary form.
Step 6
Opportunity costs are divided into 2 types: external and internal. External costs are associated with the acquisition of a resource and correspond to the benefit that can be obtained by using the same costs of another alternative resource. Internal costs are due to the use of not attracted, but own resources, which means that the time costs of the company's resources are equal to the benefits that can be obtained from the alternative use of their resources.
