Relevant costing aids management in making non-routine decisions by analyzing relevant costs and benefits.
Not all costs are useful in decision-making. Relevant costs refer to those that will differ between different alternatives. Irrelevant costs are those that will not cause any difference.
Non-routine decisions include: make or buy a product component, accept or reject a special order, sell or process further, add or drop a product line, and optimum product combination.
In this unit, we will learn how to apply concepts of relevant costs in making non-routine decisions.