Is the Opportunity Cost of Idle Capacity Zero? Coase (1938) Versus Managerial Accounting Circa 2000

Many accounting textbooks state that the opportunity cost of idle fixed assets is zero. A few exceptions refer to repair, overhaul, employee vacation and congestion, giving rise to positive opportunity cost. We show that in important and frequently encountered situations, idled assets have positive opportunity cost arising from extension of their useful life. We also present a simple framework to help managers identify such situations and correctly assess opportunity cost.

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Year of publication:	2002-09-23
Authors:	Balakrishnan, Ramamurthy oRamjio ; Sivaramakrishnan, K. ; Sunder, Shyam NMI
Institutions:	School of Management, Yale University

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Extent:	application/pdf
Series:	Yale School of Management Working Papers.
Type of publication:	Book / Working Paper
Classification:	M21 - Business Economics ; M40 - Accounting and Auditing. General ; L21 - Business Objectives of the Firm
Source:	RePEc - Research Papers in Economics

Persistent link: https://www.econbiz.de/10005587154