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Which Costs Are Relevant In The Decision To Shut Down The Clayton Facility

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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.


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.


All future costs 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 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.


What is the difference in relative costs and relevant costs?

Relative costs refer to the comparison of costs between different alternatives or options, helping in decision-making processes by assessing which option is more economical. Relevant costs, on the other hand, are specific costs that will directly impact a decision, typically involving future costs that can be avoided or incurred based on the choice made. While relative costs help compare options, relevant costs focus on those that are pertinent to a specific decision.


The most relevant costs that should be used in decision making are?

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In management accounting what are relevant costs?

Relevant cost is that cost which will be affected due to the decision company going to make.


Is variable cost a relevant cost?

No. If a variable cost does not differ between alternatives than it is irrelevant.


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.


Is it true that a cost that is the same for multiple alternatives under consideration is not relevant?

Relevent costs are those costs which are important for any specific decision, if any cost is required for all the options in specific decision then it is not relevant as no matter which alternative is choosen this cost is required to be beared that's why that cost is not considered as relevant cost.


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.