short cost cs notes RelevantCosting cs cost mcq notes
cs executive cost and management accounting mcq
A management decision involves predictions of costs& revenues. Only the costs and revenues that will differ among alternativeactions are relevant to the decision. The role of historical data is to aid theprediction of future data. But historical data may not be relevant to themanagement decision itself. Qualitative factors may be decisive in many cases,but to reduce the number of such factors to be judged, accountants usually tryto express many decision factors as possible in quantitative terms.
Meaning of Relevant Costs: -
Relevant costs represent those future costs that willbe changed by a particular decision. While irrelevant costs are those coststhat will not be affected by a decision. In the short run, if the relevantrevenues exceed the relevant costs then it will be worthwhile accepting thedecision. Therefore relevant costs playa major role in the decision-makingprocess of an organization. A particular cost can be relevant in one situationbut irrelevant in another, the important point to note is that relevant costsrepresent those future costs that will be changed by a particular decision,while irrelevant costs are those costs that will not be affected by thatdecision. We shall now see what are relevant costs and revenues fordecision-making process. In summary relevant information concerns: