For non-financial managers, it is important to understand what are relevant cost (accounting) and those that are irrelevant or sunk or past costs. Relevant costs are often in making short term decisions by all level of managements.
Append below are some of the articles on relevant costs:
Understand what are relevant costs used in short term decision [...]
Continue reading about Snapshots Of Articles Covered Under Relevant Costs
Another short term decision making situation, manager should know is when the company has spare production. So what should be done is to deal with this “special” case as special order:-
Continue reading about Short Term Decision Making- Spare Capacity
At times, manager needs to decide whether to manufacture the product or to buy the ready made from other companies.
The following are some reasons to buy from other companies:
Continue reading about Short Term Decision Making-Make Or Buy
As a result of limited supply of resources constraint, a company normally cannot produces as many products as it wish.
The limited supply of resources can be in many forms like limited cash, labor time, material/machine availability and others.
Continue reading about Limiting Factor In Short Term Decision Making
xxx
Notional Costs
Notional costs are also known as imputed cost. The primary objective of charging notional costs is to enable management to make clearer internal decisions by making sure that internal decision making become more realistic by assuming that the cost of all resources consumed reflects the full economic value – usually by applying market prices.
Notional [...]
Continue reading about Other Types Of Relevant Costs(Part 2of2)
The following are some other cost techniques which are useful to management’s decision makings:
OPPORTUNITY COST
Represents the opportunities which have been forgone by following one course of action rather than an alternative course.
The opportunity cost in this case is the profit foregone by utilizing scarce resources for one particular course of action.
Illustration:
Company [...]
To the operating managers who wish to make short term decision for example to buy or to outsource,etc, it is important to understand what is relevant cost.Below article explain what are relevant costs and some situations where this concept applies.
RELEVANT COSTS
Management needs sufficient and relevant information make the correct decisions. Hence, the need to [...]
Continue reading about Understand What Are Relevant Costs For Short Term Decision Making
Recent Comments