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Out-of-pocket and opportunity costs applied to finances

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Accounting: Concepts & Applications, by Albrecht. Problem: Chapter 15: Discussion question

How can out-of-pocket costs and opportunity costs be applied to your personal financial decisions?

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Solution Summary

The solution explains both concepts together with three personal examples for a better understanding of opportunity costs.

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Out of pocket costs refer to money actually paid or spent for a service or product. It simply means that money is gone out of your pocket, whether cash, check, debit card or credit card.

Opportunity cost, on the other hand, is a cost you didn't pay but that which you would have paid if you had selected a second option for a product or service. Said differently, it is the cost of passing up the next best choice. It is a comparison of what you did as opposed to what you could have done with the same resources ...

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