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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.
Vogel's Approximation Method (VAM) This method is a heuristic and usually provides a better starting solution than the two methods described above. However, VAM generally yield
Inventory planning & control under uncertainty The basic EOQ model assumes that all the parameters (elements) in the model are certain (i.e. can be predicted precisely in advan
Disadvantages of the cost accounting: 1. It is unnecessary: it is argued that maintenance of the cost records is not necessary and involves duplication of work. It is based o
Why is corn so frequently used in typical American foods? In what forms does it take when being part of those foods? How does that relate to the modern epidemic on obesity?
Constraints 1) A constraint of the type ≤ (≥) can be converted to an equation by adding a slack variable to (subtracting a surplus variable form) the left side of the constrain
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
EOQ Model with quantity discounts Circumstances frequently occur where firms are able to obtain quantity discounts for large purchase orders. Buying in bulkiness has some merit
EMERALD LTD is planning an expansion programme,which will require Rs 30 crores & can be funded through one of the following 1.issue further equity share of Rs 100 each at par.
Under this method, approximation is made of payments and cash receipts in the ensuring period. The dissimilarity of these payments and receipts indicates deficiency or surplus of c
Cash discount is given to buyers to bring them to make prompt payment. The credit terms identify the percentage discount and the period throughout which it is obtainable. Liberal c
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