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Future costs are relevant in decision making if the decision will affect their amounts.
For example, suppose you're trying to decide whether to drive to work or take the bus. Relevant future costs information includes (1) the cost of gasoline and tolls needed to drive to and from work and (2) the cost of bus fare because both of these costs depend on your decision. However, future costs that won't change - such next month's rent on your apartment - are not relevant because, regardless of your decision, they will not change.
Note that past costs are never relevant in decision making.
What else can I help you with?
Are all future cost are relevant in decision making?
Future costs are relevant in decision making if the decision will affect their amounts. For example, suppose you're trying to decide whether to drive to work or take the bus. Relevant future costs information includes (1) the cost of gasoline and tolls needed to drive to and from work and (2) the cost of bus fare because both of these costs depend on your decision. However, future costs that won't change - such next month's rent on your apartment - are not relevant because, regardless of your decision, they will not change. Note that past costs are never relevant in decision making.
Are sunk costs ever relevant for decision-making purposes?
NO, its cost which was wasted in past we can not recover it so it is not relevant for decision making.
Are marginal costs relevant costs?
If marginal costs are relevant for specific situation or specific decision making scenario then marginal costs are relevant costs otherwise marginal costs can be irrelevant.
The book value of old equipment is not a relevant cost in a decision?
That's correct. The book value of old equipment represents its historical cost and accumulated depreciation, which is not relevant for decision-making because it does not reflect the current market value or the future costs and benefits associated with the equipment. When making decisions, it's important to focus on relevant future costs and benefits rather than past historical costs.
The most relevant costs that should be used in decision making are?
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What role do past cost play in relevant costing decision?
Past costs can play an important role in making future cost budgets. The previous costs can help individuals budget how much money they will need for future production of similar objects.
What are the differences between relevant cost and irrelevant cost?
In decision making process those cost which are effected from the decision under consideration those costs are called relevent costs and those costs which have no impact on decision making of specific project are called irrelevent costs.
What costs are relevant in the decision to shut down the Clayton facility?
Which Costs Are Relevant In The Decision To Shut Down The Clayton Facility
When a decision is made what two things is a decision maker considering?
Two things a decision maker considers when making a decision are future costs and benefits of the decision. Other things are sometimes considered when making decisions including future consequences of the decision.
Variable costs are relevant and fixed costs are irrelevant?
Generally variable costs are relevant costs but if due to any decision fixed costs are also going to affected then fixed costs are also relevant costs.
Is variable cost a relevant cost?
No. If a variable cost does not differ between alternatives than it is irrelevant.
Step in identifying the relevant costs in a decision problem?
Identifying relevant costs in a decision problem involves first distinguishing between fixed and variable costs, focusing primarily on costs that will directly impact the decision at hand. Next, it's essential to consider future costs that will be incurred or avoided as a result of the decision, rather than sunk costs that cannot be recovered. Additionally, analyzing opportunity costs—potential benefits lost when choosing one alternative over another—helps in understanding the true economic implications of each option. Finally, summarizing these costs provides a clear comparison for making an informed decision.
