Certified Business Analysis Professional (CBAP) — Question 216

A business analyst is helping management determine which solution they should choose. As it happens that the organization can only choose one of the two solutions due to time and resource restrictions. Solution A worths $456,000 to the organization while solution B worths $565,000 to the organization. While solution A costs less, it is less risky and takes less time to complete so management elects to seize Solution A.
What is the opportunity cost?

Answer options

• A. $565,000
• B. There is not enough information to know how much the solution will cost the organization.
• C. $109,000
• D. $456,000

Correct answer: A

Explanation

The opportunity cost is the foregone benefit of the next best alternative, which in this case is Solution B valued at $565,000. Although Solution A is chosen for its lower cost and reduced risk, the organization forgoes the higher value of Solution B. The other options do not represent the correct opportunity cost of not selecting Solution B.