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1
It is one that originates from making a determination that causes the waiver of another type of alternative that could be considered when making the decision.
A company manufactures golf balls, machines operate with electricity and gas.
1 identify if is a variable, fixed or Mixed cost
a) Plastic (raw material)
b) Building rent
c) Electricity bill
2
2 Identify whether it is the cost of the product or the period
a) Plastic (raw material)
b) Auditors' fees
c) Travel expenses
Is the cost needed to create a product, including materials, labor, production supplies, factory overhead and even the labor required to deliver a service to a customer. It can be recorded as an inventory asset.
3
3 Identify whether they are differential or sunk costs
a) Depreciation of machinery
b) Hiring the cleaning service with company "A" has a monthly cost of $15,000 and hiring it with company "B" is $20,000
Is independent of the production activity of a company; it represents an invariant expense. Are costs that do not change when the quantity of output changes.
4
4 Identify relevant or irrelevant costs
a) Direct labor to open one more production line
b) Accounting salary to open an additional production line
c) Cost of plastic in the production of more production line
These are all the costs that should be considered when conducting an analysis to make a decision
5
5 Identify whether it's direct or indirect cost
a) Plastic (raw material)
b) Plant Manager Salary
c) Production operator salary
Refers to capital that has already been spent and is not possible to recover. They are excluded from future business decisions because the cost will remain the same regardless of the outcome of a decision.
