Differential Cost – The work of managers includes comparison of costs and revenues of different alternatives. Differential cost(also known as incremental cost) is the difference in cost of two alternatives. For example, if the cost of alternative A is Rs. 10,000 per year and the cost of alternative B is Rs. 8,000 per year. The difference of Rs. 2,000 would be differential cost. The differential cost can be a fixed cost or variable cost.

Opportunity Cost – Unlike other types of cost, opportunity cost does not require the payment of cash or its equivalent. It is a potential benefit or income that is given up as a result of selecting an alternative over another. For example, You have a job in a company that pays you Rs. 25,000 per year. For a better future, you want to get a Master’s degree but cannot continue your job while studying. If you decide to give up your job and return to school to earn a Master’s degree, you would not receive Rs. 25,000. Your opportunity cost would be Rs. 25,000