RELEVANT COSTS

(Mario Christianto)

Managerial accounting has a lot of topic to be learned, but there is a topic that caught my attention. The topic is relevant cost. I was drawn to this material because the material is very, very applicable to do business. Costs are relevant we use when we face a choice. For example: add or subtract product line, make or buy, outsourcing or not, etc. These choices are managerial decision in deciding which is very difficult. Costs are relevant here comes as a solution. Costs are relevant as a tool to assist us in making decisions.

Before talking more about the relevant costs, it helps us to know the definition first. Relevant costs are costs that can be avoided and should always be considered in every decision making by management. Another definition says that the relevant cost is the cost that will happen in the future with a different value for each alternative to be chosen. The definition of these two traits can know which costs are relevant:

a. Costs can be avoided by a management decision

b. Cost does not happen (the future)

c. Expenses to be incurred that have a different value for each alternative.

d. The cost is really an influence in the decision

To determine which costs are relevant can be reached as follows:

1. Collect all of the costs associated with alternative masing2

2. Eliminate the cost goes down / the past (sunk cost)

3. Eliminate costs which amount does not differ

After three stages is done then the rest is a relevant cost.

In business, any scale, any business, we will definitely meet with a situation where we have to choose, we have to decide between the options. Imagine if this decision greatly affects the life and death of your business. How might you be able to make good decisions if there is no effect, and no such a tool. The risk would be very high.

That's the reason why I am very interested in the material costs are relevant. This material is very applicable to business, jobs, and even perhaps in our lifetime. So do you still hesitate to study relevant costs? Do not hesitate! Learn and mastering! Because the material is very applicative for our lives.