Friday, July 30, 2010

Opportunity Loss

Akeelah-Dre, a medical transcription company called for a meeting comprising the top management, middle management and production management concerning its plan to invest for additional computer for their newly hired transcriptionists. The computer units will cost $500,000 however, there are still other financial struggles the company is facing which also need an immediate financial action or else the chance of getting a high percentage of bankruptcy will be more awful.

In this scenario, the company is in between two important choices on which should be given more priority though it is clearly stated above that the meeting was called to discuss about the plan to purchase additional computer units for the company's newly hired transcriptionists. Opportunity loss will definitely walk its term when they do not all agree to use half of the full amount intended for investment to purchase additional computer units and use the other half to address another financial struggle that the company is experiencing.

In this case, the best way to get through with what has already been planned at the same time apply solution to the other financial struggle to the company is through purchasing computer units on account. Meaning, the commodity will be paid half of the full price amount and pay the other half through sluggard basis upon agreed period of time.

Opportunity cost refers to an opportunity that a business firm could get when the latter chose to just purchase machinery on account instead of purchasing it in cash. Such opportunity allows a business firm to use the commodity to generate income out of it and use the latter to the pay for the machinery.

Thus, instead of using the allotted budget in full which is intended for a project which will soon be used by the company to increase profitability, the decision maker may just use half of the whole budget and intend it for the project and use the other half perhaps to supplement other financial struggles of the company.

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