What is the meaning relevant cost

Crafts from polymer clay with their own hands. A large selection of tips and examples of products from polymer clay https://clay-crafts.com/

What is Relevant Cost?

Relevant cost is a term used in managerial accounting and business decision-making that refers to the incremental and avoidable costs that are incurred when making a business decision. Relevant cost is used to determine the cost-benefit analysis of a decision, and is typically used when deciding whether to accept or reject a special order.

Relevant costs are future costs that can be avoided by taking a certain course of action. They are costs that are unique to the decision-making process and are not part of the company’s regular operating costs. Relevant costs are the only costs that should be considered when making a decision, as they are the only costs that can be directly affected by the decision.

Alles über Träume und Träume. Interpretation und Bedeutung der Träume https://traumauslegung.com/

For example, if a company is deciding whether to accept a special order, the relevant costs would include the cost of the materials needed to fulfill the order, the cost of labor to produce the goods, and any additional costs associated with the order. The company would not consider the cost of its regular overhead or the cost of its existing inventory, as these costs are not affected by the decision.

Relevant cost is an important concept in managerial accounting, as it helps managers make informed decisions that will maximize the company’s profits. By only considering the costs that are relevant to the decision-making process, managers can make decisions that will have a positive impact on the company’s bottom line.

Educational Encyclopedia