RSM222H1 Lecture Notes - Business Process, Marginal Cost, Financial Statement
7 Apr 2013
School
Department
Course
Professor
Document Summary
Avoidable cost: any cost that can be eliminated (in whole or in part) by choosing one alternative over another in decision-making situation. In managerial accounting, this term is synonymous with relevant cost and differential cost. To identify the costs and benefits that are relevant in a particular decision of situation, the stats can be followed: eliminate cost and benefits that do not differ between alternatives. These irrelevance cost consist of sunk cost and future cost and benefits that do not differ between alternatives: use the remaining costs and benefits that do differently to the alternatives in making the decisions. The costs of that remain are the differential, or avoidable, costs. The manager needs different costs for different purposes, this means that a particular group of costs may be relevant; for another purpose, an entirely different group of costs may be relevant. Thus, in each decision situation the manager must examine the data at hand and isolate the relevant cost.
