COST ACCOUNTING
INFORMATION FOR DECISION MAKING
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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it is a historical cost precise in nature.
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it is an expected future cost that is different for each alternative
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it is a historical cost that is the same among all alternatives.
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it is an expected future cost that is the same for each alternative
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Detailed explanation-1: -Answer · Correct Answer = Option ‘D’ The cost should be considered ‘relevant’ …
Detailed explanation-2: -In order to meet the criteria for relevancy, a cost must have two criteria that include they affect the future and they differ among alternatives. Other group of theorists asserted that the relevant costs are applicable to decision. Costs are relevant, if they direct the executive towards the decision.
Detailed explanation-3: -Relevant costs are only the costs that will be affected by the specific management decision being considered. The opposite of a relevant cost is a sunk cost.
Detailed explanation-4: -The variable costs are not always relevant costs, because the variable costs are relevant or irrelevant depending on other factors. If under different alternatives the variable cost remains the same, then it will not be considered a relevant cost.
Detailed explanation-5: -Therefore, the relevance of cost is determined by its potential effect(s) on the decision.