What are sunk costs Opportunity costs incremental costs what is meant by relevant costs?
Thereof, what is relevant cost example?
Relevant cost is a managerial accounting term that describes avoidable costs that are incurred only when making specific business decisions. As an example, relevant cost is used to determine whether to sell or keep a business unit.
Additionally, what are incremental relevant costs? Incremental cost also referred to as marginal cost, is the total change a company experiences within its balance sheet or income statement due to the production and sale of an additional unit of product. Incremental costs may be classified as relevant costs in managerial accounting.
Keeping this in consideration, what are relevant costs for decision making?
A relevant cost is a cost that only relates to a specific management decision, and which will change in the future as a result of that decision. The relevant cost concept is extremely useful for eliminating extraneous information from a particular decision-making process.
What are examples of sunk costs?
A sunk cost is a cost which has already been spent but not recoverable in any case and future business decisions should not be affected by past spent. Spending on researching, equipment or machinery buying, rent, payroll, marketing or advertising expenses is the main examples of sunk cost.