Revenue-earning possibilities which are foregone as a result of implementing a plan; the cost of not doing something else.

An opportunity cost is the cost of not being able to do something else.

For example, if a firm opts to build a new factory, it may not be able to create ten new retail outlets

which was another option open to it, in spending these particular funds. Or if you buy a holiday, you

may not be able to buy a new television. The television is the opportunity cost of the holiday ie the

benefit foregone.

The other types of cost shown are methods of classifying actual (real) costs. Opportunity costs are, in

a sense, not real; they are hypothesized and therefore do not show in the balance sheet or profit and

loss account of a business.