prefix: doi.org/10.52283/1.ajbmr |
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RELEVANT COST CONCEPT: A Glaring Dichotomy-Accountant’s Perspective
â–ºOmah Ishmael and Osamor . I .P
10.52283/NSWRCA.AJBMR.20120203A04
ABSTRACT
Purpose: This paper examines the concept of relevant cost, its relevance in decision making analysis, its decision advantage in both short and long-term planning decisions and how it influences the decision maker’s choice of preference/priorities. The study is based on primary information (data) tailored to allow individual respondents comprehend the concept of “relevant cost”. Forty (40) closely related questionnaires were prepared and administered in some business retail traders in “ALABA INTERNATIONAL MARKET”. A review of related literature was also applied to have a general over-view of the concept of relevant cost ideology. It was revealed that relevant cost or costs are costs appropriate to a specific management decision. They are estimated future costs, that are different under alternative courses of action for a specific problem. It consist of both fixed and variable costs. Relevance in decision making is independent of cost behavior pattern. It influences the decision maker’s choice of preference and priority. If a decision is to be taken to either add a product or drop a product, salary of a supervisor or managing director is irrelevant. It is a differential (or incremental) cash flow that forms a component of relevant cost.
Keywords: Relevant, cost, differential, incremental, irrelevant, highlight, limiting factor, preference, appropriate, cost indifferent point (CIP).Pages:25-33 :: Download-View
