According to the definition that the author David Noel Ramírez Padilla1 makes in his book "Administrative Accounting" "the opportunity cost is the one that originates from making a determination that causes the renunciation of another type of alternative". That is, if you have two opportunities to obtain benefits, but each of them requires us to dedicate our entire working day.
An example is of that professional who had the opportunity to enter to work in government in parallel to enter to teach in a private university.
The first option would generate an income of $ 2,200.00 biweekly, $ 4,400.00 monthly, $ 52,800.00 Mexican a year.
Another example; the Accountant who had the idea of starting a business of his own whose income and estimated costs were as follows:
| Income: | $ 380,000.00 | |
| Costs: | ||
| Materials and accessories | $ 110,000.00 | |
| Salaries | $ 90,800.00 | |
| Rent expenses | $ 40,200.00 | |
| Electricity expenses | $ 6,000.00 | |
| Variable expends | $ 4,000.00 |
On the other hand, he was presented with the option of participating as a business advisor with an annual income of $ 180,000.00 Mexicans.
For the first case, one might think that the option of being employed in the government would be accepted, since dedicating to teach classes was an uncertain income situation since depending on the assigned class hours, they could not generate the $ 52,800.00 per year. If it were lower, the opportunity cost would also be lower, generating a positive incremental profit, but if the income from teaching classes was greater than $ 52,800.00, the incremental profit would be negative. Which means you would be incurring losses by choosing to become a government employee.
Case two shows that the own business option would generate profits of $ 129,000.00, so when comparing the income generated with the costs incurred plus the opportunity cost, a negative incremental profit is obtained as shown below:
| Income: | $ 380,000.00 | |
| Costs: | ||
| Materials and accessories | $ 110,000.00 | |
| Salaries | $ 90,800.00 | |
| Rent expenses | $ 40,200.00 | |
| Electricity expenses | $ 6,000.00 | |
| Variable expends | $ 4,000.00 | |
| Of opportunity | $ 180,000.00 | $ 431,000.00 |
| Incremental or additional profit | - $ 51,000.00 |
While the second option, this is employment as a business advisor leaves a positive incremental profit, which is as follows:
| Income as an advisor | $ 180,000.00 | |
| Costs: | ||
| Keep the premises | $ 40,200.00 | |
| Of opportunity | $ 129,000.00 | $ 169,200.00 |
| Incremental or additional profit | $ 10,800.00 |
INDIVIDUAL BENEFITS AGAINST COLLECTIVE BENEFITS.
