RSM222H1 Lecture Notes - Lecture 10: Fixed Cost, Decision-Making, Sunk Costs
2 Apr 2017
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Relevant costs are costs to be incurred at some future time and that differ for each option. A relevant cost has two properties (1) it differs between decision options, (2) costs that incur in the future. Avoidable costs are relevant costs and unavoidable costs are irrelevant. Costs are situation specific; costs relevant in one situation might not be relevant in another context. We are comparing every single line items for both scenarios and we have a column for the difference. Short-cut approach for differential cost only focuses on line items where they are different. Drop segment only if the company"s overall profit will increase. This would happen if fixed cost savings exceed the lost contribution margin. Fixed general factory and general admin would not be affected. Need more info technically but avoidable in this case) Fixed costs traceable (segment specific) and common costs. The relevant cost of ,000 < relevant cost of .
