Often asked: what Of The Following Would Not Be Relevant In A Make-or-buy Decision?

Which of the following is relevant information in a decision whether old equipment presently being used should be replaced by new equipment?

joint costs. difference between future cost savings and the new equipment’s costs. Which of the following is relevant information in a decision whether old equipment presently being used should be replaced by new equipment? It is relevant since it reduces the cost of the new equipment.

What costs are never relevant in decision-making?

Irrelevant costs are those that will not change in the future when you make one decision versus another. Examples of irrelevant costs are sunk costs, committed costs, or overheads as these cannot be avoided. There is no correct answer for each business, it will often alter per situation.

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Which is relevant for decision-making?

Decision-making involves choosing between alternatives. A critical step in the decision-making process is identification of all the relevant information for each alternative. Relevant information is any information that would have an impact on the decision.

Which of the following is most likely relevant in a make or buy decision?

Which of the following is most likely relevant in a make-or-buy decision? In a make-or-buy decision, the original purchase price of equipment that is currently used in the manufacturing process is usually a relevant cost because the equipment can be sold for its salvage value. Fixed costs are always sunk costs.

What costs are always relevant?

Relevant costs include differential, avoidable, and opportunity costs. Irrelevant costs include sunk and fixed overhead costs.

What is the relevant range?

The relevant range is the range of activity where the assumption that cost behavior is a straight line (linear) is reasonably valid. With variable costs then, the relevant range will be the range where the cost of adding one more, will be the same as the last.

Which cost is most relevant in decision making?

Relevant cost is a managerial accounting term that describes avoidable costs that are incurred only when making specific business decisions. The concept of relevant cost is used to eliminate unnecessary data that could complicate the decision-making process.

Are all future costs relevant in decision making?

Relevant costs are those costs that will make a difference in a decision. Future costs are relevant in decision making if’ the decision will affect their amounts. Relevant costs are future costs that will differ among alternatives.

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What makes a cost relevant?

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.

Why opportunity cost is relevant in decision-making?

In business, opportunity costs play a major role in decision-making. If you decide to purchase a new piece of equipment, your opportunity cost is the money spent elsewhere. Companies must take both explicit and implicit costs into account when making rational business decisions.

Which type of incurred costs are not relevant in decision-making?

Sunk costs are those costs that happened and there is not one thing we can do about it. These costs are never relevant in our decision making process because they already happened!

Why are sunk costs relevant in decision-making?

A sunk cost is a cost that cannot be recovered or changed and is independent of any future costs a business might incur. Because a decision made today can only impact the future course of business, sunk costs stemming from earlier decisions should be irrelevant to the decision-making process.

What is make buy decision explain with examples?

A Make or Buy Decision is a decision made to either manufacture a product/ service in house or buy it from outside suppliers (outsourcing) based on cost-benefit analysis.

What do you mean by make-or-buy decision?

A make-or-buy decision is an act of choosing between manufacturing a product in-house or purchasing it from an external supplier. Make-or-buy decisions, like outsourcing decisions, speak to a comparison of the costs and advantages of producing in-house versus buying it elsewhere.

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When opportunity costs exist they are always relevant?

When opportunity costs exist, they are always relevant. When capacity is constrained, relevant costs equal incremental costs plus opportunity costs. If the $20,000 spent to purchase inventory could be invested an earn interest of $500, then the opportunity cost of holding inventory is $20,000.

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