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
CONTIGENCY THEORY Some researchers have argued that the context in which budgetary control is used is as important as the style in which it is implemented and used. This is ter

Private sector companies have multiple stakeholders who are likely to have divergent interests.( five stakeholder groups and discuss their financial and other objectives).

What is performance budgeting The concept of performance budgeting is used mainly in the government and public sector undertakings. It projects the government activities an

Advance Factoring and Maturity Factoring: In both recourse and non-recourse factoring whether the factor advances cash against book debts to the client instantly on assignment

Representation of Simplex method We shall use the example previously stated for the graphical solution. The standard form of the model is given by: Maximize :  Z = 3X E + 2

Determine the Profitability ratios in relation to investment a) Return on capital employed/ return on investment b) Return on equity or return on equity share holders' funds

companyXYZusesthe job oder costing system.

Standard error of estimate (Se) The coefficient of determination r 2 gives us an indication of the reliability of the estimate of total cost based on the regression equation b

Explain the Types of standards The following is the brief description of various types of standards: 1) Basic standards: these are the standards which are assumed to remai

Cyclic Chains: In Markov Chains the current state of the system depends on all previous states. It is a stochastic process.  Sometimes transition probability matrices are diff