Assumptions-relevant costs , Managerial Accounting

Assumptions for relevant costs

The key assumptions made in relevant costing are:

  • The cost behavior is recognized.
  • The amount of fixed costs, unit variable costs, selling prices and sales demand are known with certainty.
  • The objective of the decision maker in the short-term is to maximize satisfaction which can be defined as maximization of short-term profit.
  • The information on which the decision is based is complete and reliable.

 

There are various types of decisions that can be considered in this section, Illustrations comprise:


a. Make or Buy decisions
b. Shut down problems
c. Extra shift decisions
d. Joint cost decisions

Posted Date: 12/5/2012 7:42:17 AM | Location : United States







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