Relevant Costs
Relevant costs are those costs that are pertinent to the decision on hand.They are used in decision making by the management.They are used to eliminate unnecessary data and aid in decision making. Examples of situation where relevant cost is used
Determining to continue or eliminate a product
Make vs Buy decisions
Accepting a special order
Irrrelevant Costs
They are the costs that will not change as a result of management decision. example Depreciation, Rent, Salary
Sunk Costs
These are costs which are incurred in past and cannot be recovered.They are considered as irrelevant in decision making. Example purchase price of materials or equipment bought.
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