Define opportunity costs and discuss why it is always relevant in tactical (one-off) decision? Give one example of an opportunity cost that arises in a specific decision and explain why it is relevant to the decision.

 

Opportunity cost is defined as the cost of choosing or following one alternative available than all the other available alternatives. 

Opportunity cost is always relevant in tactical (one-off) decision because while making any decision whether to accept or reject a special order, it helps to realize that as the decision is taken once in such special orders, it cannot be rejected afterwards. Hence, there can be likely losses after such decisions are made. So, such special orders are to be researched first.

An example is when a business owns its building. If the company moves, the building could be rented to someone else. The opportunity cost of staying there is the amount of rent the company would get.