Concept explainers
Determination of relevant cost describes the concept of relevant concept in decision making. The relevant cost is the cost which has the impact of change with the implementation of decision.
To Discuss: The term ‘relevant cost’.

Answer to Problem 1Q
Solution: The relevant cost is the cost incurred while making decisions. It refers to incremental
Explanation of Solution
The Relevant cost in the decision making is a cost which has the relevance while taking up managerial decisions. These are referred to as all those cost which has the impact of change (whether increase or decrease) with the implementation of decisions taken. These are referred to as following cost:
- Cash outflows need to be undertaken for implementing any project/decision and it is the relevant cost for the project/ decision.
- If the decision is to choose between the alternatives, then the relevant is the incremental cost to be incurred in a particular alternative than the cost incurred in other alternative.
- The Relevant cost also includes the opportunity cost of the next best alternative. The opportunity cost is the amount of revenue/income generated from present project, which has to be sacrificed for undertaking the new opportunity.
- The relevant cost is the cost which can be avoided if the decision is taken.
To conclude, it can be said that the relevant cost is the cost which changes with the decision making, and measuring these cost will have an impact on decision making.
Want to see more full solutions like this?
Chapter 12 Solutions
MANAGERIAL ACCOUTING LL WITH ACCESS
- Please don't use AI And give correct answer .arrow_forwardLouisa Pharmaceutical Company is a maker of drugs for high blood pressure and uses a process costing system. The following information pertains to the final department of Goodheart's blockbuster drug called Mintia. Beginning work-in-process (40% completed) 1,025 units Transferred-in 4,900 units Normal spoilage 445 units Abnormal spoilage 245 units Good units transferred out 4,500 units Ending work-in-process (1/3 completed) 735 units Conversion costs in beginning inventory $ 3,250 Current conversion costs $ 7,800 Louisa calculates separate costs of spoilage by computing both normal and abnormal spoiled units. Normal spoilage costs are reallocated to good units and abnormal spoilage costs are charged as a loss. The units of Mintia that are spoiled are the result of defects not discovered before inspection of finished units. Materials are added at the beginning of the process. Using the weighted-average method, answer the following question: What are the…arrow_forwardQuick answerarrow_forward
- Financial accounting questionarrow_forwardOn November 30, Sullivan Enterprises had Accounts Receivable of $145,600. During the month of December, the company received total payments of $175,000 from credit customers. The Accounts Receivable on December 31 was $98,200. What was the number of credit sales during December?arrow_forwardPaterson Manufacturing uses both standards and budgets. For the year, estimated production of Product Z is 620,000 units. The total estimated cost for materials and labor are $1,512,000 and $1,984,000, respectively. Compute the estimates for: (a) a standard cost per unit (b) a budgeted cost for total production (Round standard costs to 2 decimal places, e.g., $1.25.)arrow_forward
- AccountingAccountingISBN:9781337272094Author:WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.Publisher:Cengage Learning,Accounting Information SystemsAccountingISBN:9781337619202Author:Hall, James A.Publisher:Cengage Learning,
- Horngren's Cost Accounting: A Managerial Emphasis...AccountingISBN:9780134475585Author:Srikant M. Datar, Madhav V. RajanPublisher:PEARSONIntermediate AccountingAccountingISBN:9781259722660Author:J. David Spiceland, Mark W. Nelson, Wayne M ThomasPublisher:McGraw-Hill EducationFinancial and Managerial AccountingAccountingISBN:9781259726705Author:John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting PrinciplesPublisher:McGraw-Hill Education





