opportunity cost

The next best benefit foregone. The opportunity lost. Often measured as the contribution margin given up by not doing an activity. For example, if a sole proprietor is foregoing a salary and benefits of $50,000 at another job, the sole proprietor has an opportunity cost of $50,000. Accountants do not record opportunity costs in the general ledger or report them on the income statement, but they are costs that should be considered in making decisions.

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