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Managerial Accounting Chapter Twelve Notes

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ACCT 2230
Elliot Currie

Chapter Twelve Relevant Costs for Decision Making y Relevant cost is a cost that differs between alternatives in a particular decision In managerial accounting this term is synonymous with avoidable cost and differential costy Cost Concepts for Decision Making o Identifying Relevant Costs and BenefitsOne those costs and benefits that differ in total between alternatives are relevant in a decision If a cost will be the same regardless of the alternative selected then the decision has no effect on the cost and it can be ignored An avoidable cost is a cost that can e eliminated in whole or in part by choosing one alternative over another Two broad categories of costs are never relevant in decisions These irrelevant costs are sunk costs and future costs that do not differ between the alternatives A sunk cost is a cost that has already been incurred and that cannot be avoided regardless of what a manager decides to doy Analysis of Various Decision Situations o Adding and Dropping Product Lines and Other SegmentsDecisions relating to whether existing product lines or other segments of a company should be dropped and new ones
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