Which Costs Are Relevant In The Decision To Shut Down The Clayton Facility
Examples are Sunk Costs, Fixed costs and Allocated Costs.
One disadvantage to retailing is the costs associated with running a retail facility. You have to pay for utilities and market the location.
A blanket absorption rate is a single rate of absorption used throughout an organization's production facility and based upon its total production costs and activity. The use of a single blanket rate makes the apportionment of overhead costs unnecessary since the total production costs are to be used.
An economically competitive geothermal power plant can cost as low as $3400 per kilowatt installed. (1) While the cost of a new geothermal power plant is higher than that of a comparable natural gas facility, in the long run the two are similar over time. This is because natural gas construction costs account for only one third of the total price of the facility, while the cost of the fuel at a natural gas facility represents two thirds of the cost. The initial construction costs of a geothermal facility, in contrast, represent two thirds or more of total costs. So although initial investment is high for geothermal, natural gas and geothermal are still economically comparable over a long term.
a non-compensatory method
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.
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.
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.
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.
NO, its cost which was wasted in past we can not recover it so it is not relevant for decision making.
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.
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Relevant cost is that cost which will be affected due to the decision company going to make.
No. If a variable cost does not differ between alternatives than it is irrelevant.
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.
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.
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.