Relevant costs for non-routine decisions, Managerial Accounting

RELEVANT COSTS FOR NON-ROUTINE DECISIONS

A relevant cost is a cost that is appropriate to a specific management decision. To be relevant, a cost should be:

1) Future cost – A decision is usually about the future & management not what has already been done. A cost that has already been incurred is therefore irrelevant to any decision being made now e.g. costs already paid or costs committed by decisions made in the past.

2) Relevant costs are cash flows–It is assumed that decisions are taken which would maximize the satisfaction of the company owners & therefore such decisions must not be ignored. Such costs include depreciation, notional rent or notional interest or absorbed O/H.

3) Relevant costs arise as a direct consequence of making a decision. It must be an incremental cost i.e. the difference between the cost with the decision & the cost without the decision.

Posted Date: 12/5/2012 7:40:15 AM | Location : United States







Related Discussions:- Relevant costs for non-routine decisions, Assignment Help, Ask Question on Relevant costs for non-routine decisions, Get Answer, Expert's Help, Relevant costs for non-routine decisions Discussions

Write discussion on Relevant costs for non-routine decisions
Your posts are moderated
Related Questions
Determine Cost pool and Cost drivers Cost pool: it is another name given to a cost centre and,  therefore an activity cost centre may also be termed as an activity cost pool.

how do i use least squares method to solve semi average problem?

1. A firm's independent auditors have the responsibility to: a. assess the firm's accounting policies. b. ascertain the firm's profit potential. c. uncover all fraudulent

Describe the impact of different types of standards on motivations and specifically,the likely effect on motivation of adopting the labor standard recommended?

Explain variable cost and fixed cost Variable costs: costs that vary almost in the direct proportion to the volume of production are known as variable costs. The examples of

accounting process or accounting cycle

QUESTION 1: P A RT A You are the Cost Accountant of an industrial concern and have been assigned the duty of preparing a cost accounting system. Initially it has been de

When to order-Material control If deliveries from suppliers normally take two weeks to arrive, then replenishment orders should be placed with them when the level of stocks rep

dentify and explain the many classsification of cost for planning,control,performance evaluation and decision making

Right now you are 20 years old and you have decided that you want to have $2,000,000 in the bank when you turn 65 years old. How much must you deposit each year to reach your goal