COST ACCOUNTING
INFORMATION FOR DECISION MAKING
Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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opportunity cost
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avoidable cost
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unavoidable cost
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sunk cost
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differential cost
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Detailed explanation-1: -Definition: Relevant cost, also called differential cost, is a management accounting term decsribing costs that pertain to a particular decision. Relevant costs will vary based on the context of the decision, such as an omnichannel business analysis by a multi-platform retailer.
Detailed explanation-2: -The relevant costs are future cash flows, incremental costs, opportunity costs, and avoidable costs.
Detailed explanation-3: -What is a Relevant Cost? A relevant cost is a cost that only relates to a specific management decision, and which will change in the future as a result of that decision. The relevant cost concept is extremely useful for eliminating extraneous information from a particular decision-making process.
Detailed explanation-4: -Costs are broadly classified into four types: fixed cost, variable cost, direct cost, and indirect cost.