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 benefits foregone when one alternative is chosen over another. Therefore, they are relevant for decision-making, such as the make/buy decision, which involves comparing the cost and benefits of producing a good or service internally versus purchasing it from an external source. Option A is incorrect because opportunity costs are not generally included in traditional financial statements. Option B and C are also incorrect because opportunity costs do not involve cash transactions. Option D is incorrect because opportunity costs do not involve accounting journal entries.

Which of the Following Is True Concerning Opportunity Costs