# What is the opportunity cost formula?

The opportunity cost formula is a simple solution to answer the age old question of whether a particular course of action is worth starting. Opportunity cost is the total sum of what a person or organization has after they compare that sum to what they sacrifice. Opportunity cost is all about the profit a person or organization associates with missed or lost opportunities.

Another way to think about opportunity cost is to see it as a part of a lost contribution margin. A lost contribution margin is revenue, another word for money, minus variable cost. Variable costs come into play as a person or organization has to choose one course of action over another when providing a service or product. People and organizations use the opportunity cost formula to figure out if they have an absolute or comparative advantage over their competition.

The opportunity cost formula is a tool for staying competitive in a market that is not mutually exclusive. It is a useful formula for managing profit loss and figuring out if a course of action sustainable or not. The opportunity cost formula is an important tool for a crucial understanding of benefits and gains from alternative use of resources.

Q&A Related to "What is the opportunity cost formula?"
 opportunity cost of x is equal to y over x. The answer then becomes the slope for the graph. http://wiki.answers.com/Q/What_is_the_opportunity_...
 http://www.chacha.com/question/what-is-the-formula...
 Opportunity cost is that which you could have done it you did not do what you are considering. In other words, if you spend your pay on your rent you loose the Opportunity to invest http://www.ask.com/web-answers/Business/Finance/wh...
 Most people have an intuitive grasp of the relationship between cost and quantity for simple items such as groceries. For relatively small purchases, cost and quantity move linearly http://www.ehow.com/info_8728792_marginal-opportun...
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