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  • CA Final AMA Summary Chart On Relevant Costing PDF

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    The document discusses relevant and irrelevant costs for decision making. It provides examples of relevant costs like variable costs, avoidable fixed costs, and opportunity costs that influence decisions. Irrelevant costs do not impact decisions and include sunk or historical costs and committed fixed costs. Decision making approaches include total cost, differential/incremental cost, and opportunity cost approaches. The opportunity cost approach considers relevant costs and opportunity costs. The document also categorizes different types of material, labor, overhead and depreciation costs as relevant or irrelevant depending on the situation.

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    CA-Final-AMA-Summary-chart-on-Relevant-Costing.pdf

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    The document discusses relevant and irrelevant costs for decision making. It provides examples of relevant costs like variable costs, avoidable fixed costs, and opportunity costs that influence decisions. Irrelevant costs do not impact decisions and include sunk or historical costs and committed fixed costs. Decision making approaches include total cost, differential/incremental cost, and opportunity cost approaches. The opportunity cost approach considers relevant costs and opportunity costs. The document also categorizes different types of material, labor, overhead and depreciation costs as relevant or irrelevant depending on the situation.

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    178 views1 page

    CA Final AMA Summary Chart On Relevant Costing PDF

    Uploaded by

    Nks
    The document discusses relevant and irrelevant costs for decision making. It provides examples of relevant costs like variable costs, avoidable fixed costs, and opportunity costs that influence decisions. Irrelevant costs do not impact decisions and include sunk or historical costs and committed fixed costs. Decision making approaches include total cost, differential/incremental cost, and opportunity cost approaches. The opportunity cost approach considers relevant costs and opportunity costs. The document also categorizes different types of material, labor, overhead and depreciation costs as relevant or irrelevant depending on the situation.

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    Relevant Costing

    Relevant Cost Irrelevant Cost

    Future cost influencing a decision. Varies from situation to situation & cant Cost which are not influenced by any decision and thus have no impact on any decision.
    last longer, applicable only for short term. In opportunity approach opportunity cost is E.g.: Sunk / Historical Cost, Committed FC.
    considered as relevant cost. E.g.: Variable cost, Avoidable FC, Opp. Cost.

    Approaches for decision making:


    1) Total Cost Approach (Considers Relevant as well as Irrelevant Costs)
    2) Differential/ Incremental Cost Approach (Considers only Relevant Costs, Irrelevant Costs are eliminated by default)
    3) Opportunity Cost Approach (Considers Relevant Costs only along with Opportunity Costs)

    Relevant Cost under Opportunity Approach:


    Cost to be Incurred ***
    Add: Benefit Lost/Opp. Cost ***
    Less: Benefit Achieved/Opp. Gain (***)
    Net Relevant /Incremental Cost ***

    Material Labour Overhead Depreciation


    Variable over head
    Fully relevant
    In Stock To be purchased Direct Labour Indirect Labour Fixed Over head In possession To be Purchased
    Non Moving Not Busy No Use
    Rel.cost=Benefit Lost Rel.cost=cost Rel.cost= diff in
    Regular to be incurred Avoidable Unavoidable scrap value
    Rel.cost=Current PP Busy in Regular work =fully relevant =always irrelevant Regular use
    Toxic Rel.cost= cost to be Rel.cost=diff in
    Rel.cost=Saving in incurred+Benft Lost Purchase value
    removal cost
    Treat As Indirect Worker if not retrenched
    Regular use after offer No use after offer
    Rel. cost = Cost to be Not Busy Busy in Regular work Additional Time/over Rel.cost= Pur.Value at start - Rel.cost=diff in
    incurred for units time Pur. Value at end Purchase value
    required Rel.cost = NIL cost to be Rel.cost= Extra cost
    incurred NIL to be incurred
    + opp. Cost **
    Rel Cost **

    Courtesy: Shubham Chakraborty

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