Information Megastar Software recently developed new spreadsheet software, Ad-So
ID: 2590669 • Letter: I
Question
Information
Megastar Software recently developed new spreadsheet software, Ad-Soon, which it intends to market by mail through ads in computer magazines. Just prior to introducing Ad-Soon, Megastar received an unexpected offer from Vision Computer Company to buy all rights to the software for £4 million cash.
* it is important to consider that Megastar got the offer from Vision without any advertisement and selling and distribution costs
Question :-
1- Might there be any other opportunity costs to consider at the time of the making this decision? If so, explain briefly.
Plase answer Question 1 in a paragraph by critical thinking .
Explanation / Answer
(1).
As per information of the question, it is clear that Megastar Software received an offer from Vision computer company for $4 million cash.
Now let’s know something about the opportunity costs. Opportunity costs refer to the value of best available option, that have been missed due to acceptance of an offer. So in given case when Megaster software accept offer of vision company at $4 million cash then there may be some other offers missed due to accepting offer of the vision. Hence price of second best offer will be opportunity cost for the Megastar. As we know that there are always options available in the market. So there would be some options for Megastar Software too. Hence if there are options associated with a decision then there will be always a opportunity cost.
But as it is also given in the question that Megastar received this offer without any advertisement and selling cost. So it is possible that Vision company have known about this from some other sources and if other buyers do not know about this Ad-Soon then there will be no opportunity cost for this decision because there is no alternate buyers before advertisement & selling cost.
If like Vision company, there are some other buyers then there will be an opportunity cost for this decision. Otherwise it will be assumed that without advertisement & selling costs there is no other buyers. Hence there will be no opportunity cost.