There is always freedom of choice, but not freedom from consequence.
No. If a variable cost does not differ between alternatives than it is irrelevant.
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.
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.
Fixed cost become relevent cost when a particular decision affects the fixed cost of production. For Example: Before Decision fixed cost $100 After Decision Fixed Cost $120 so in this case fixed cost also becomes relevent for decision making.
Cost concept for Decision making ?
Role of cost accounting in managerial decision making?"
Incremental analysis includes two concepts Incremental cost Incremental revenue IC is the additional cost incurred for additional output. In other words changes in cost due to changes in level of output. Whereas IR is the additional revenue from additional output or the changes in revenue due to changes in output. For every business decisions there is IR and IC. In order to determine whether the decision is sound or not we should compare the IC and IR of every decision. If the IR exceeds the IC, or IR is equal to IC the decision can be assumed as a sound decision.
Decision making is a life wire to every organization
Why is the opportunity cost of a decision always less than the cost of the chosen good or service?
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.
help you determine the oppotunit cost of your decision.
help you determine the oppotunit cost of your decision.