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TMChpt12.doc

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Department
Administration
Course Code
ADM2341
Professor
A L L

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Description
TM 121AGENDA RELEVANT COSTS FOR DECISION MAKING1Identification of relevant costs2Drop or retain a segment3Make or buy decision4Utilization of constrained resources5Special order6Joint product costs7Appendix 13A Pricing products and servicesTM 122RELEVANT COSTSEvery decision involves a choice from among at least two alternativesA relevant cost or benefit is a cost or benefit that differs in total between the alternatives Any cost or benefit that does not differ between the alternatives is irrelevant and can be ignored Relevant costs and benefits are also known as differential costs and benefitsAvoidable costs are those costs that can be eliminated in whole or in part by choosing one alternative over another Avoidable costs are relevant costsTwo broad categories of costs are never relevant in decisions1Sunk costs2Future costs that do not differ across alternativesTo make a decision1Eliminate costs and benefits that do not differ in total across alternatives2Base the decision on the remaining costs and benefits
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