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Relevant cost is an accounting term which describes the costs which can be avoided while making an important business decision. The relevant cost concept in accounting is very useful as it eliminates unnecessary data or information from a decision making process
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Relevant Cost For Decision Making
As discussed, relevant cost is the cost that relates to a specific decision taken by the management. This cost will change in the future as a result of the decision taken. The relevant cost concept in accounting is very useful as it eliminates unnecessary data or information from a decision making process. An objective of the relevant cost is to check the extent of cash outflows that will result from the implementation of decision making. There are different types of relevant cost such as future cash flows, avoidable costs, opportunity costs and incremental costs. Application of relevant cost includes make or buy decisions, further processing decisions and competitive pricing decisions.
A manager is the one who is responsible for making a decision. To run the business successfully, he must be able to differentiate between the relevant and irrelevant data should be able to use the relevant one in analyzing any alternatives. There are many examples needed to explain the relevant cost properly which will do when completing your assignment. We will make sure all the related topic is covered while writing on relevant cost for decision making.
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