Question

A manager in your organization tells you over coffee one morning, “Differential costing is easy; variable costs are the only costs that are relevant.” As the organization’s accountant, how would you respond to this statement?

Later in your conversation this same manager opens a folder and produces a document he just received regarding a special order at a price that he believes is “below cost.” The manager is opposed to accepting orders of this nature because he feels every sale needs to carry a fair share of full costs in order to keep the company from failing. What would be your reply to this manager?

Answer 1

Answer ro question

Reply to manager

Differential costing is easy; variable costs are the only costs that are relevant.” this statement is partly true because in decision making some time fixed cost alsi relevent.

special order at a price that he believes is “below cost. Sometime company may get special order belove cost in that cercumstances they have to consider only relevent cost means cost which is going to incure tthat particular order regardless full cost.