An accounting information system should be designed to provide useful information. To be useful the information must be:
If a management accountant is trying to decide whether a cost is relevant to a decision, he or she should consider the cost relevant if:
In order for information to be relevant, the decision to be made must have an effect on:
An opportunity cost is defined as:
Which of the following would be a relevant cost that would need to be considered for pricing a special order?
Sunk costs, unitising costs, how costs are allocated, and leaving out opportunity costs are all factors where errors are often made, and will ultimately affect the outcome of the decision.
Efficient decision-making tends to consider relevant information only and this information focuses on incremental revenue and expenses.
The book value of an asset such as equipment is an example of:
Which of the following statements about relevant information is/are true?
i. For information to be relevant, it must relate to the future.
ii. For information to be relevant, it must differ between the alternatives.
iii. For information to be relevant, it must be completely accurate
When a department or a product is showing a loss after all costs have been traced and allocated, a company has no option but to make the decision to either close the department or drop the product.