0
Want this question answered?
Be notified when an answer is posted
Add your answer:
Earn +20 pts
Why are historical costs irrelevant?
Historical costs are irrelevant because historical costs are sunk cost and no body can change any decision made in past so anything which can not be change due to underlying decision then that cost is irrelevant cost.
What is the distinction between relevant cost and irrelevant cost?
Relevant cost is that cost which is necessary for the underlying decision in decision making process while irrelevant cost is not necessary to be decision to be made.
Why depreciation on an existing asset is always irrelevant?
Depreciation is an invisible, non-cash cost and it is irrelevant when calculating the cash flow of the company which is the true indicator of whether the company is making a profit or not. Depreciation is also irrelevant because it is not truly realized until the asset is resold or scrapped at the end of its life. Recording it every year is consistent with the theory of conservatism when writing off costs. Depriciation is also irrelevant for the existing assets becoz it is fixed and fixed costs are always irrelevant unless they are incremental
Variable costs are irrelevant whenever they do not differ among the alternatives at hand. do you agree?
Any cost whether variable cost or fixed cost is irrelevant if not different between alternatives at hand.
What is the definition of Historical Cost?
what is the definition of historical cost
What is the difference between relevant cost and irrelevant cost?
Relevant cost is that cost which is required for the specific decision making process or the cost which will be change due to specific decision while irrelevant cost has no concern with decision making or any specific decision.
What is historical cost?
Historical cost is the cost of an item when it was originally acquired. Historical cost does not reflect the change of value over time that an asset undergoes.
Advantages of historical cost accounting?
strength of historical cost accounting
Is direct labor cost a relevant cost?
If direct labor cost creates impact or influences the decision then it is relevant cost but if direct labor is not creating influence or changing in decision then it is irrelevant cost for example direct labor cost remain same irrespective of whatever the decision then direct labor cost is also irrelevant.
What is the difference between historical cost and replacement cost?
I believe historical cost is the original cost @ time of buying. Replacement cost is the price it would cost you @ present day values
Are fixed costs always irrelevant?
No fixed costs are not always irrelevant. Some fixed costs may differ among the alternatives and hence will be relevant. e.g. When figuring the incremental cost of the more expensive car, the relevant costs would be the purchase price of the new car (net of the resale value of the old car) and the increases in the fixed costs of insurance and automobile tax and license.
What is the historical cost model?
Historical cost model is a valuation process for assets wherein they are valued at cost of acquisition plus all costs incidental to cost of acquisition.
