What is Opportunity Cost?
Opportunity cost refers to the profit or amount of money lost when one option/alternative is chosen over another.
This should be based on your company’s own cost of capital standards.
How Do You Calculate The Opportunity Cost?
To calculate the amount of your opportunity cost, simply get the cost of capital on a time period then multiply it by the average net value of inventory on the same time period.
Opportunity Cost = Cost of Capital x Average Net Value of Inventory