One of the most helpful software you can use is Microsoft Excel. It is possible to do an endless number of things with a dataset by utilizing Excel’s capabilities and tools. In this article, we’ll go over the steps necessary to create Opportunity Cost Calculator. Making decisions based on opportunity costs is essential to use resources effectively to maximize economic returns. In light of this, the following tutorial will focus on the step-by-step process of creating an Opportunity Cost Calculator in Excel.
What Is Opportunity Cost?
Opportunity Cost is typically referred to as the value of the next-best choice and is also known as the Alternative Cost. In other words, the Opportunity Cost is a word used in economics to describe the worth of what you’ll need to sacrifice to pick another option. When deciding, you’ll factor in the Opportunity Cost and think about what you’ll give up. A key benefit of marginal utility is that it facilitates examining multiple options, enabling better decision-making.
- Opportunity Cost
Opportunity Cost = The Sacrificed Made / The Gain Obtained
Opportunity Cost = Next Best Alternative Return – Chosen Option Return
Opportunity Cost Calculator in Excel: 3 Suitable Examples
Creating an Opportunity Cost Calculator in Excel can be difficult if we do not know the proper steps. This article will walk you through the five stages of creating an alternative cost calculator in Excel. We will use a typical formula suitable for the first example and calculate the opportunity cost. When choosing an Item Over Another, we will calculate opportunity costs throughout the first model. We generate a calculator for the Scenarios-based opportunity cost in the following demonstration. In the last rally, we will consider the profit from the monitor as the Next Best Alternative and the laptop profit as the Chosen Option. We will apply the second formula to calculate the opportunity cost of the monitor. Moreover, we will choose the item’s selling price in a Dynamic way. To quickly comprehend the technique, carefully follow these steps.
I have yet to say that I have been working with the Microsoft Excel 365 version for this post. Nevertheless, you are free to use any other edition that will provide you with the most significant amount of convenience.
1. Opportunity Cost Calculator When Choosing an Item Over Another
Step 1: Opportunity Cost Model Construction in Excel
The first and most crucial step is to construct an illustrative Data Model. Please follow the below directions to complete the assignment.
- First, create three columns titled Product Name, Cost Price and Selling Price.
- Second, make a section for the Maximum Quantity in the range F4:G6.
- After that, generate an information box named Initial Capital in the field B8:C8.
- Finally, build a portion for the Profit Returns and the Opportunity Cost.
Step 2: Fill Out the Data Model with the Necessary Information
We will enter the necessary data into the data model to determine the Opportunity Cost. To complete the assignment, please follow the instructions provided below.
- First, input the name in the Product Name column and then fill out the Price columns.
- Afterwards, type the same name in the Quantity table and insert the Initial Capital.
Step 3: Round the Highest Amount of Quantity Using the INT Function
Here, we’ll use the INT function to round off the most significant quantity we can produce from the Initial Capital.
- Pick the G5 cell to start.
- Second, type the equation shown below into the Formula bar.
- Drag the AutoFill Handle icon to the G6 cell.
Step 4: Calculation of Opportunity Cost Using the Formula
Throughout this last section, we will apply some basic formulas and calculate the Opportunity Cost. Please follow these directions to the letter to complete the assignment.
- Start by picking the D12 cell.
- Second, type into the Formula bar the equation shown below.
- Later, move the AutoFill icon to D13.
- Then, choose the G13 cell.
- In the end, type into the Formula bar the equation shown below.
- The last step is to press Enter or Tab.
2. Scenarios-Based Opportunity Cost Calculator in Excel
Step 1: Build a Date Model to Calculate Opportunity Cost
The first and foremost step is to create a Data Model for illustration purposes. This article will consider a model consisting of three tables and an information box. The first table will introduce the products and prices, and the following describes the sacrifice and gains quantities. Lastly, another table will display the Opportunity Cost. To accomplish the work, please follow the instructions below.
- First, create two columns titled Product Name and Cost Price in the B4:C6 range.
- Second, build a table consisting of three columns named Scenarios, Monitor and Laptop in the E4:G8 field.
- After that, in the B8:C8 range, generate an information box called Initial Capital.
- Last, we will take another two columns for Marginal Flow and Opportunity Cost throughout the B10:C14 range.
Read More: Truck Operating Cost Calculator in Excel
Step 2: Input the Required Information in Data-model for Marginal Cost Calculator
At this stage, we will input the intended information in the data model to calculate the Opportunity Cost. Here, we will sacrifice Monitor Quantities and gain Laptop Quantities. To finish the assignment, please follow the guidelines that are listed below.
- First, input the Product Name, in this case, Monitor and Laptop.
- Second, write the Cost Price for the items.
- After that, set the Initial Capital to $9000.
- At this point, we will fill up the Scenarios column and have four cases.
- Later, put the values for the Marginal Flow column.
- Next, insert the down-ward quantities in the Monitor column.
- Likewise, type upward quantities in the Laptop column.
Step 3: Insert Excel VBA Code to Determine Opportunity Cost
In this context, we will insert VBA code to calculate the Opportunity Cost utilizing the Monitor and Laptop columns. Here, we will declare four procedures for each scenario. Please be sure to follow the instructions outlined below to complete the job.
- Firstly, navigate to the Developer tab.
- Second, choose the Visual Basic icon.
- After that, click on
Insert → Module
- Input the following code in the Module box.
Sub Case1_OpportunityCost() Range("C11").Select ActiveCell.FormulaR1C1 = _ "=IFERROR((R[-7]C-R[-6]C)/(R[-6]C-R[-7]C),""-"")" End Sub Sub Case1toCase2_OpportunityCost() Range("C12").Select ActiveCell.FormulaR1C1 = _ "=IFERROR((R[-7]C-R[-6]C)/(R[-6]C-R[-7]C),""-"")" End Sub Sub Case2toCase3_OpportunityCost() Range("C13").Select ActiveCell.FormulaR1C1 = _ "=IFERROR((R[-7]C-R[-6]C)/(R[-6]C-R[-7]C),""-"")" End Sub Sub Case3toCase4_OpportunityCost() Range("C14").Select ActiveCell.FormulaR1C1 = _ "=IFERROR((R[-7]C-R[-6]C)/(R[-6]C-R[-7]C),""-"")" End Sub
- Later, press Ctrl + S or tap the Save icon with the Macro Enabled (xlsm) extension.
Step 4: Generate Buttons for Suboptimality Cost Calculator
To keep the calculation of Opportunity Cost automatic, we will generate four buttons and assign previously created macros. To finish the work, make sure to adhere to the directions provided below.
- First of all, go to the Developer tab.
- Secondly, from the Controls group, click on the Insert symbol.
- After that, choose the Button icon from the Form Controls section.
- Now, draw a button for Case-1.
- Subsequently, the Assign Macro window will appear.
- Presently, choose Case1_OpportunityCost, and hit OK.
- Latterly, name the button Calculate.
- Due to this, our desired button will look like the below one.
- Similarly, draw another button for Case-1 to Case-2 marginal flow.
- Later, assign the Case1toCase2_OpportunityCost procedure and click OK.
- Make a second button representing the transition from Case-2 to Case-3 marginal flow.
- Assign the Case2toCase3_OpportunityCost process, and then press the OK.
- Draw the last button for Case-3 to Case-4 marginal flow.
- Next, click OK after assigning the Case3toCase4_OpportunityCost sub-method.
- At this stage, our Opportunity Cost Calculator will look like the below one.
Step 5: Display and Test the Opportunity Cost Calculator in Excel
Lastly, we will display the calculator and click the Calculate buttons to determine the Opportunity Cost for each Marginal Flow. To successfully do the task, it is imperative that you carefully follow the directions provided below.
- To begin, click the first button to calculate Case-1.
- Due to this, we will get an outcome like the below one.
- After that, press all the following buttons to display the Opportunity Cost.
3. Calculate Opportunity Cost With Dynamic Selling Price in Excel
Step 1: Create a Data Model for Opportunity Cost Analysis
Making a Data Model for demonstration purposes is the first and most crucial step. Here, we’ll look at a sample layout with four elements: two tables and two boxes with supplementary data. Please use the following guidelines to complete the task.
- First, make a table containing the Product Name and Cost Price column in B4:C6.
- Second, take another section for the Maximum Quantity in the range E4:F6.
- After that, create an information box titled Initial Capital.
- Next, take another information section for the Profit Returns and the Opportunity Cost.
Step 2: Input Necessary Data into the Data Model
We will enter the necessary data into the data model to determine the Opportunity Cost.
- First, input the intended price in the Cost Price column.
- After that, put 9000 in the C8 cell.
Step 3: Utilize the INT function to Round the Maximum Quantity
In this subsection, we will calculate the maximum quantity of an item from the Initial Capital and apply the INT function to round the output.
- To begin, select the F5 cell.
- Second, insert the below equation in the Formula bar.
- Later, drag the AutoFill Handle icon to F6.
Step 4: Opportunity Cost Calculation Running Excel VBA Code
Finally, we’ll execute the VBA code to calculate the alternative cost when selecting one item over another. Please follow the directions given below to complete the task.
- First, navigate to the Developer tab and choose Visual Basic.
- After that, click on
Insert → Module
- Later, insert the following code in the Module box.
Sub CalculateOpportunityCost() Dim NextBestAlternativeReturn As Double Dim NextBestAlternativeCostPrice As Double Dim ChosenOptionReturn As Double Dim ChosenOptionCostPrice As Double Dim nextBestReturnUnitPrice As Double Dim nextBestReturnUnitQuantity As Double Dim chosenReturnUnitPrice As Double Dim chosenReturnUnitQuantity As Double Dim opportunity_cost As Double nextBestReturnUnitQuantity = Range("F5").Value NextBestAlternativeCostPrice = Range("C5").Value chosenReturnUnitQuantity = Range("F6").Value ChosenOptionCostPrice = Range("C6").Value nextBestReturnUnitPrice = InputBox("Enter the return of the next best alternative unit price:") chosenReturnUnitPrice = InputBox("Enter the return of the chosen option unit price:") NextBestAlternativeReturn = (nextBestReturnUnitPrice - NextBestAlternativeCostPrice) * nextBestReturnUnitQuantity ChosenOptionReturn = (chosenReturnUnitPrice - ChosenOptionCostPrice) * chosenReturnUnitQuantity Range("D12").Value = NextBestAlternativeReturn Range("D13").Value = ChosenOptionReturn End Sub
- Next, press F5 or click the Run icon.
- Eventually, the Microsoft Excel window will appear.
- Latterly, input the Next Best Alternative unit price and hit OK.
- Afterwards, insert the value of the Chosen Option unit price.
- Later, hit OK from the Microsoft Excel input box.
- Consequently, we will see the Profit Returns in the range of D12:D13.
- Then, pick cell F13.
- In the end, type the equation shown below into the Formula bar.
- Pressing Enter or Tab is the last step.
Download Practice Workbook
Please click on the link below this paragraph if you want a free copy of the sample workbook discussed in the presentation.
You can create an Opportunity Cost Calculator in Excel by following the steps. Please provide any additional recommendations or enhanced techniques as you continue to use them. Remember to put your thoughts, questions, and instructions in the space provided.
- How to Create Electricity Cost Calculator in Excel
- How to Create Shipping Cost Calculator in Excel
- How to Construct Cost Inflation Index Calculator in Excel
- How to Create Fuel Cost Calculator Using Excel Formula
- How to Make Vehicle Life Cycle Cost Analysis Spreadsheet in Excel
- How to Create an Export Price Calculator in Excel