Opportunity cost and its role in liability accounting - a study in Al-Wessam Dairy Products and Foodstuff Company

Abstract

The problem of this research comes up with the result that not considering the concept of opportunity cost as an important part of the costs, not mentioning it in the performance reports, and depending only on the explicit expenses will lead to veiling an important part of the relevant costs, then the inability of the management, in different levels, to take any right decision and imposing aware control.
This research presents a theoretical and practical study regarding applying a responsibility accounting system based on opportunity cost.
The research depends on the following hypothesis: - "Taking the concept of opportunity cost and making it appear in the performance reports will ensure relevant information that will assist the management in its different levels to make the right decisions and imposing awarded control through relying on the multiple linear regression to define the variable cost for each product, and the use of linear programming to define the best available alternative opposite to the company".
The research is divided into paragraphs dealing with the research methodology, previous studies, the opportunity cost, the explicit and implicit costs, a relationship of the opportunity cost with concepts of responsibility accounting and profit centres and control reports, the limitation of variable cost for each product following the multiple linear regression model, preparing the ideal production plan for the year 2007 to the sample company using the linear programming model, applying the responsibility accounting system which is based on opportunity cost, and the important conclusions that revealed by the study and giving the suggested recommendations.