Assumptions-relevant costs , Managerial Accounting

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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

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