Lecture 8 - Relevant costs Flashcards
1
Q
Criteria for a cost to be relevant
A
Must occur in the future
Must be a cash flow as a direct consequence
There are extra incremental costs as a result of the decision
2
Q
Examples of relevant costs when buying a tv
A
Purchase price
Insurance
Running costs
Repair and maintenance
3
Q
Things to consider when accepting or rejecting one off orders
A
Fixed costs remain unchanged so not relevant to decision
Direct labour is fixed
4
Q
Problems using relevant costing
A
Difficult to fid information about various alternatives
Criteria of relevance does not take into account fixed costs
Non financial factors must also be considered like quality, repeat orders etc
5
Q
Fixed assets that aren’t relevant in relevant costing
A
Depreciation
Past costs
6
Q
A
