MANAGERIAL ACCOUNTING (ACCESS) >C<
MANAGERIAL ACCOUNTING (ACCESS) >C<
22nd Edition
ISBN: 9781307839319
Author: Garrison
Publisher: MCG/CREATE
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Chapter 13, Problem 1Q
To determine

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’.

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Answer to Problem 1Q

Solution: The relevant cost is the cost incurred while making decisions. It refers to incremental cash outflows to be incurred as a result of decision implementation, opportunity cost to be foregone for implementing the decision and the cost which is avoidable with the implementation of decision.

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:

  1. Cash outflows need to be undertaken for implementing any project/decision and it is the relevant cost for the project/ decision.
  2. 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.
  3. 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.
  4. The relevant cost is the cost which can be avoided if the decision is taken.
In other words, all those factors which have the impact of change in the cost shall be regarded as relevant and its cost shall be treated as relevant cost.
Conclusion

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.

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Chapter 13 Solutions

MANAGERIAL ACCOUNTING (ACCESS) >C<

Ch. 13.A - Prob. 11PCh. 13.A - PROBLEM 12A-12 Absorption Costing Approach to...Ch. 13.A - PROBLEM 12A-13 Value-Based Pricing LO12-10 The...Ch. 13 - Prob. 1QCh. 13 - Prob. 2QCh. 13 - Prob. 3QCh. 13 - Prob. 4QCh. 13 - “Variable costs and differential costs mean the...Ch. 13 - 12-6 "All future costs are relevant in decision...Ch. 13 - Prentice Company is considering dropping one of...Ch. 13 - Prob. 8QCh. 13 - 12-9 What is the danger in allocating common fixed...Ch. 13 - 12-10 How does opportunity cost enter into a make...Ch. 13 - 12-11 Give at least four examples of possible...Ch. 13 - 12-12 How will relating product contribution...Ch. 13 - Define the following terms: joint products, joint...Ch. 13 - 12-14 From a decision-making point of view, should...Ch. 13 - What guideline should be used in determining...Ch. 13 - Prob. 16QCh. 13 - Prob. 1AECh. 13 - Prob. 2AECh. 13 - Cane Company manufactures two products called...Ch. 13 - ( Alpha Beta $30 $...Ch. 13 - Prob. 3F15Ch. 13 - Prob. 4F15Ch. 13 - Prob. 5F15Ch. 13 - ( Alpha Beta $30 $...Ch. 13 - Prob. 7F15Ch. 13 - Cane Company manufactures two products called...Ch. 13 - Prob. 9F15Ch. 13 - ( Alpha Beta $30 $...Ch. 13 - Prob. 11F15Ch. 13 - Prob. 12F15Ch. 13 - ( Alpha ...Ch. 13 - ( Alpha Beta $30 $...Ch. 13 - ( Alpha Beta $30 $...Ch. 13 - EXERCISE 12-1 Identifying Relevant Costs...Ch. 13 - EXERCISE 12-2 Dropping or Retaining a Segment...Ch. 13 - EXERCISE 12-3 Make or Buy Decision LO12-3 Troy...Ch. 13 - EXERCISE 12-4 Special Order Decision...Ch. 13 - EXERCISE 12-5 Volume Trade-Off Decisions...Ch. 13 - Prob. 6ECh. 13 - Prob. 7ECh. 13 - Prob. 8ECh. 13 - Prob. 9ECh. 13 - Prob. 10ECh. 13 - ( $3.60 10.00 2.40 9.00 $25.00 ) EXERCISE 12-11...Ch. 13 - Prob. 12ECh. 13 - EXERCISE 12-13 Sell or Process Further Decision...Ch. 13 - en r Ch. 13 - Prob. 15ECh. 13 - ( $150 31 20 29 3 24 15 $272 $34 ) EXERCISE...Ch. 13 - Prob. 17ECh. 13 - Prob. 18PCh. 13 - PROBLEM 12-19 Dropping or Retaining a Segment...Ch. 13 - PROBLEM 12-20 Sell or Process Further Decision...Ch. 13 - Prob. 21PCh. 13 - PROBLEM 12-22 Special Order Decisions LO12-4...Ch. 13 - PROBLEM 12-23 Make or Buy Decision LO12-3 Silven...Ch. 13 - Prob. 24PCh. 13 - Prob. 25PCh. 13 - Prob. 26PCh. 13 - Prob. 27PCh. 13 - Prob. 28PCh. 13 - CASE 12-29 Sell or Process Further Decision LO12-7...Ch. 13 - CASE 12-30 Ethics and the Manager; Shut Dora or...Ch. 13 - CASE 12-31 Integrative Case: Relevant Costs;...Ch. 13 - CASE 12-32 Make or Buy Decisions; Volume...Ch. 13 - Prob. 33C
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