703:, the finished building will not fetch its original intended price, and is expected to sell for only $ 1.2 million. If, in deciding whether or not to continue construction, the $ 1 million sunk cost were incorrectly included in the analysis, the firm may conclude that it should abandon the project because it would be spending $ 1.5 million for a return of $ 1.2 million. However, the $ 1 million is an irrelevant cost, and should be excluded. Continuing the construction actually involves spending $ 0.5 million for a return of $ 1.2 million, which makes it the correct course of action.
37:
661:
It is often important for businesses to distinguish between relevant and irrelevant costs when analyzing alternatives because erroneously considering irrelevant costs can lead to unsound business decisions. Also, ignoring irrelevant data in analysis can save time and effort.
698:
A construction firm is in the middle of constructing an office building, having spent $ 1 million on it so far. It requires an additional $ 0.5 million to complete construction. Because of a downturn in the
706:
A managerial accounting term for costs that are specific to management's decisions. The concept of relevant costs eliminates unnecessary data that could complicate the decision-making process.
1893:
1849:
301:
622:
286:
1933:
733:
291:
600:
451:
155:
52:
897:
820:
306:
296:
62:
779:
358:
754:
486:
363:
311:
254:
395:
1928:
1331:
348:
1512:
1301:
1291:
984:
1451:
1424:
766:
647:) is a cost that differs between alternatives being considered. In order for a cost to be a relevant cost it must be:
1878:
1859:
1436:
1281:
1247:
1232:
1211:
1206:
1853:
1429:
1119:
1109:
1918:
999:
686:
1883:
1829:
1572:
1527:
1366:
1237:
1114:
593:
400:
1587:
1537:
1371:
1361:
1351:
1341:
1079:
1069:
1029:
1019:
892:
813:
234:
110:
526:
461:
36:
1707:
1552:
1412:
1355:
1311:
1274:
1024:
964:
939:
909:
882:
185:
1522:
1839:
1497:
1482:
1456:
1395:
1074:
1014:
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989:
614:
511:
249:
115:
57:
1888:
1592:
1336:
1306:
1259:
1222:
1148:
1099:
1064:
1004:
969:
904:
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561:
100:
1818:
1627:
1487:
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1346:
1326:
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1227:
1183:
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20:
1873:
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1607:
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1034:
979:
974:
806:
700:
390:
225:
180:
1737:
1712:
1662:
1622:
1502:
1390:
1193:
1129:
1094:
1084:
954:
750:
729:
618:
571:
566:
145:
120:
1787:
1732:
1717:
1702:
1687:
1667:
1617:
1597:
1577:
1532:
1139:
1089:
1059:
1054:
944:
870:
353:
239:
1898:
1792:
1757:
1722:
1657:
1582:
1567:
1461:
1417:
1254:
1188:
1163:
1158:
1134:
865:
850:
626:
441:
405:
195:
175:
160:
105:
90:
47:
1923:
1812:
1797:
1762:
1747:
1727:
1697:
1547:
1517:
1168:
877:
845:
630:
446:
414:
125:
1912:
1777:
1767:
1742:
1682:
1677:
1672:
1652:
1642:
1612:
1602:
1507:
1407:
1380:
1144:
556:
419:
338:
333:
170:
1807:
1752:
1647:
1637:
1632:
1557:
1402:
927:
855:
682:
491:
230:
1782:
1772:
1562:
1441:
1385:
860:
377:
1692:
1492:
1269:
673:
481:
165:
28:
745:
Williams, Jan R., Haka, Susan F., Bettner, Mark S., Meigs, Robert F. (2002).
1542:
1472:
919:
837:
829:
1321:
264:
244:
150:
747:
Financial and
Managerial Accounting: The Basis for Business Decisions
410:
85:
433:
215:
80:
220:
802:
724:
Garrison, Ray H., Noreen, Eric W., Brewer, Peter C. (2007).
798:
1828:
1470:
1204:
953:
918:
836:
780:"Management Accounting: Concepts and Techniques"
814:
767:Accounting Tools: What is an irrelevant cost?
720:
718:
594:
8:
784:Oregon State University College of Business
302:International Financial Reporting Standards
821:
807:
799:
749:(p. 848) New York, NY: McGraw-Hill/Irwin.
728:(p. 578) New York, NY: McGraw-Hill/Irwin.
601:
587:
15:
623:Engineering economics (civil engineering)
714:
27:
292:Generally-accepted auditing standards
7:
898:Agent-based computational economics
307:International Standards on Auditing
726:Managerial Accounting 12th Edition
14:
364:Notes to the financial statements
1356:neoclassical–Keynesian synthesis
681:Notional or Non cash costs (e.g
312:Management Accounting Principles
35:
1:
1934:Project management techniques
1292:Critique of political economy
287:Generally-accepted principles
1950:
1430:Real business-cycle theory
612:
1870:
156:Constant purchasing power
53:Constant purchasing power
487:Accounting organizations
475:People and organizations
1070:Industrial organization
893:Computational economics
235:Amortization (business)
1275:Modern monetary theory
940:Experimental economics
910:Pluralism in economics
883:Mathematical economics
1929:Management accounting
615:Management Accounting
359:Management discussion
1149:Social choice theory
905:Behavioral economics
888:Complexity economics
326:Financial statements
279:Accounting standards
1233:American (National)
933:Economic statistics
552:Earnings management
522:Positive accounting
396:Double-entry system
386:Bank reconciliation
191:Revenue recognition
701:real estate market
527:Sarbanes–Oxley Act
462:Sarbanes–Oxley Act
391:Debits and credits
226:Cost of goods sold
181:Matching principle
1906:
1905:
1437:New institutional
734:978-0-07-352670-6
645:differential cost
619:Capital budgeting
611:
610:
572:Two sets of books
567:Off-balance-sheet
209:Selected accounts
146:Accounting period
1941:
1919:Cost engineering
1110:Natural resource
945:Economic history
871:Mechanism design
823:
816:
809:
800:
794:
793:
791:
790:
775:
769:
764:
758:
743:
737:
722:
603:
596:
589:
39:
16:
1949:
1948:
1944:
1943:
1942:
1940:
1939:
1938:
1909:
1908:
1907:
1902:
1899:Business portal
1866:
1865:
1864:
1824:
1588:von Böhm-Bawerk
1476:
1475:
1466:
1238:Ancient thought
1216:
1215:
1209:
1200:
1199:
1198:
949:
914:
866:Contract theory
851:Decision theory
832:
827:
797:
788:
786:
778:Dennis Caplan.
777:
776:
772:
765:
761:
744:
740:
723:
716:
712:
696:
678:Committed costs
633:
627:Cost accounting
613:Main articles:
607:
578:
577:
576:
541:
533:
532:
531:
506:
498:
497:
496:
476:
468:
467:
466:
436:
426:
425:
424:
380:
370:
369:
368:
328:
318:
317:
316:
281:
271:
270:
269:
210:
202:
201:
200:
196:Unit of account
176:Historical cost
161:Economic entity
140:
132:
131:
130:
75:
67:
48:Historical cost
12:
11:
5:
1947:
1945:
1937:
1936:
1931:
1926:
1921:
1911:
1910:
1904:
1903:
1901:
1896:
1891:
1886:
1881:
1876:
1871:
1868:
1867:
1863:
1862:
1857:
1847:
1842:
1836:
1835:
1834:
1832:
1826:
1825:
1823:
1822:
1815:
1810:
1805:
1800:
1795:
1790:
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1775:
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1765:
1760:
1755:
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1740:
1735:
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1725:
1720:
1715:
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1645:
1640:
1635:
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1620:
1615:
1610:
1605:
1600:
1595:
1590:
1585:
1580:
1575:
1570:
1565:
1560:
1555:
1550:
1545:
1540:
1535:
1530:
1525:
1520:
1515:
1510:
1505:
1500:
1495:
1490:
1485:
1479:
1477:
1471:
1468:
1467:
1465:
1464:
1459:
1454:
1449:
1444:
1439:
1434:
1433:
1432:
1422:
1421:
1420:
1410:
1405:
1400:
1399:
1398:
1388:
1383:
1378:
1377:
1376:
1375:
1374:
1364:
1359:
1344:
1339:
1334:
1329:
1324:
1319:
1314:
1309:
1304:
1302:Disequilibrium
1299:
1294:
1289:
1284:
1279:
1278:
1277:
1267:
1262:
1257:
1252:
1251:
1250:
1240:
1235:
1230:
1225:
1219:
1217:
1205:
1202:
1201:
1197:
1196:
1191:
1186:
1181:
1176:
1171:
1166:
1161:
1156:
1151:
1142:
1137:
1132:
1127:
1122:
1117:
1115:Organizational
1112:
1107:
1102:
1097:
1092:
1087:
1082:
1077:
1072:
1067:
1062:
1057:
1052:
1047:
1042:
1037:
1032:
1027:
1022:
1017:
1012:
1007:
1002:
997:
992:
987:
982:
977:
972:
967:
961:
960:
959:
957:
951:
950:
948:
947:
942:
937:
936:
935:
924:
922:
916:
915:
913:
912:
907:
902:
901:
900:
890:
885:
880:
878:Macroeconomics
875:
874:
873:
868:
863:
858:
853:
846:Microeconomics
842:
840:
834:
833:
828:
826:
825:
818:
811:
803:
796:
795:
770:
759:
738:
713:
711:
708:
695:
692:
691:
690:
679:
676:
659:
658:
655:
652:
641:avoidable cost
631:Microeconomics
609:
608:
606:
605:
598:
591:
583:
580:
579:
575:
574:
569:
564:
559:
554:
549:
543:
542:
539:
538:
535:
534:
530:
529:
524:
519:
514:
508:
507:
504:
503:
500:
499:
495:
494:
489:
484:
478:
477:
474:
473:
470:
469:
465:
464:
459:
454:
449:
444:
438:
437:
432:
431:
428:
427:
423:
422:
417:
415:General ledger
408:
403:
398:
393:
388:
382:
381:
376:
375:
372:
371:
367:
366:
361:
356:
351:
346:
341:
336:
330:
329:
324:
323:
320:
319:
315:
314:
309:
304:
299:
294:
289:
283:
282:
277:
276:
273:
272:
268:
267:
262:
257:
252:
247:
242:
237:
228:
223:
218:
212:
211:
208:
207:
204:
203:
199:
198:
193:
188:
183:
178:
173:
168:
163:
158:
153:
148:
142:
141:
138:
137:
134:
133:
129:
128:
123:
118:
113:
108:
103:
98:
93:
88:
83:
77:
76:
73:
72:
69:
68:
66:
65:
60:
55:
50:
44:
41:
40:
32:
31:
25:
24:
13:
10:
9:
6:
4:
3:
2:
1946:
1935:
1932:
1930:
1927:
1925:
1922:
1920:
1917:
1916:
1914:
1900:
1897:
1895:
1892:
1890:
1887:
1885:
1882:
1880:
1877:
1875:
1872:
1869:
1861:
1858:
1855:
1851:
1848:
1846:
1843:
1841:
1838:
1837:
1833:
1831:
1827:
1821:
1820:
1816:
1814:
1811:
1809:
1806:
1804:
1801:
1799:
1796:
1794:
1791:
1789:
1786:
1784:
1781:
1779:
1776:
1774:
1771:
1769:
1766:
1764:
1761:
1759:
1756:
1754:
1751:
1749:
1746:
1744:
1741:
1739:
1736:
1734:
1731:
1729:
1726:
1724:
1721:
1719:
1716:
1714:
1711:
1709:
1706:
1704:
1701:
1699:
1696:
1694:
1691:
1689:
1686:
1684:
1681:
1679:
1676:
1674:
1671:
1669:
1666:
1664:
1661:
1659:
1656:
1654:
1651:
1649:
1646:
1644:
1641:
1639:
1636:
1634:
1631:
1629:
1626:
1624:
1621:
1619:
1616:
1614:
1611:
1609:
1606:
1604:
1601:
1599:
1596:
1594:
1591:
1589:
1586:
1584:
1581:
1579:
1576:
1574:
1571:
1569:
1566:
1564:
1561:
1559:
1556:
1554:
1551:
1549:
1546:
1544:
1541:
1539:
1536:
1534:
1531:
1529:
1526:
1524:
1521:
1519:
1516:
1514:
1511:
1509:
1506:
1504:
1501:
1499:
1496:
1494:
1491:
1489:
1486:
1484:
1483:de Mandeville
1481:
1480:
1478:
1474:
1469:
1463:
1460:
1458:
1455:
1453:
1450:
1448:
1445:
1443:
1440:
1438:
1435:
1431:
1428:
1427:
1426:
1425:New classical
1423:
1419:
1416:
1415:
1414:
1411:
1409:
1406:
1404:
1401:
1397:
1394:
1393:
1392:
1389:
1387:
1384:
1382:
1381:Malthusianism
1379:
1373:
1370:
1369:
1368:
1365:
1363:
1360:
1357:
1353:
1350:
1349:
1348:
1345:
1343:
1342:Institutional
1340:
1338:
1335:
1333:
1330:
1328:
1325:
1323:
1320:
1318:
1315:
1313:
1310:
1308:
1305:
1303:
1300:
1298:
1295:
1293:
1290:
1288:
1285:
1283:
1280:
1276:
1273:
1272:
1271:
1268:
1266:
1263:
1261:
1258:
1256:
1253:
1249:
1246:
1245:
1244:
1241:
1239:
1236:
1234:
1231:
1229:
1226:
1224:
1221:
1220:
1218:
1213:
1208:
1203:
1195:
1192:
1190:
1187:
1185:
1182:
1180:
1177:
1175:
1172:
1170:
1167:
1165:
1162:
1160:
1157:
1155:
1152:
1150:
1146:
1145:Public choice
1143:
1141:
1138:
1136:
1133:
1131:
1128:
1126:
1123:
1121:
1120:Participation
1118:
1116:
1113:
1111:
1108:
1106:
1103:
1101:
1098:
1096:
1093:
1091:
1088:
1086:
1083:
1081:
1080:Institutional
1078:
1076:
1073:
1071:
1068:
1066:
1063:
1061:
1058:
1056:
1053:
1051:
1048:
1046:
1043:
1041:
1038:
1036:
1033:
1031:
1030:Expeditionary
1028:
1026:
1023:
1021:
1020:Environmental
1018:
1016:
1013:
1011:
1008:
1006:
1003:
1001:
998:
996:
993:
991:
988:
986:
983:
981:
978:
976:
973:
971:
968:
966:
963:
962:
958:
956:
952:
946:
943:
941:
938:
934:
931:
930:
929:
926:
925:
923:
921:
917:
911:
908:
906:
903:
899:
896:
895:
894:
891:
889:
886:
884:
881:
879:
876:
872:
869:
867:
864:
862:
859:
857:
854:
852:
849:
848:
847:
844:
843:
841:
839:
835:
831:
824:
819:
817:
812:
810:
805:
804:
801:
785:
781:
774:
771:
768:
763:
760:
756:
755:0-07-239688-1
752:
748:
742:
739:
735:
731:
727:
721:
719:
715:
709:
707:
704:
702:
693:
688:
684:
680:
677:
675:
672:
671:
670:
668:
663:
656:
653:
650:
649:
648:
646:
642:
639:(also called
638:
637:relevant cost
632:
628:
624:
620:
616:
604:
599:
597:
592:
590:
585:
584:
582:
581:
573:
570:
568:
565:
563:
560:
558:
557:Error account
555:
553:
550:
548:
545:
544:
537:
536:
528:
525:
523:
520:
518:
515:
513:
510:
509:
502:
501:
493:
490:
488:
485:
483:
480:
479:
472:
471:
463:
460:
458:
455:
453:
450:
448:
445:
443:
440:
439:
435:
430:
429:
421:
420:Trial balance
418:
416:
412:
409:
407:
404:
402:
401:FIFO and LIFO
399:
397:
394:
392:
389:
387:
384:
383:
379:
374:
373:
365:
362:
360:
357:
355:
352:
350:
347:
345:
342:
340:
339:Balance sheet
337:
335:
334:Annual report
332:
331:
327:
322:
321:
313:
310:
308:
305:
303:
300:
298:
295:
293:
290:
288:
285:
284:
280:
275:
274:
266:
263:
261:
258:
256:
253:
251:
248:
246:
243:
241:
238:
236:
232:
229:
227:
224:
222:
219:
217:
214:
213:
206:
205:
197:
194:
192:
189:
187:
184:
182:
179:
177:
174:
172:
171:Going concern
169:
167:
164:
162:
159:
157:
154:
152:
149:
147:
144:
143:
136:
135:
127:
124:
122:
119:
117:
114:
112:
109:
107:
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1894:Publications
1850:Publications
1817:
1413:Neoclassical
1403:Mercantilism
1312:Evolutionary
1174:Sociological
1147: /
1045:Geographical
1025:Evolutionary
1000:Digitization
965:Agricultural
928:Econometrics
856:Price theory
787:. Retrieved
783:
773:
762:
746:
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687:amortization
683:depreciation
666:
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660:
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636:
634:
492:Luca Pacioli
413: /
233: /
231:Depreciation
139:Key concepts
111:Governmental
1688:von Neumann
1457:Supply-side
1442:Physiocracy
1386:Marginalism
1075:Information
1015:Engineering
995:Development
990:Demographic
861:Game theory
838:Theoretical
669:costs are:
657:Incremental
505:Development
482:Accountants
378:Bookkeeping
297:Convergence
255:Liabilities
186:Materiality
74:Major types
1913:Categories
1845:Economists
1718:Schumacher
1623:Schumpeter
1593:von Wieser
1513:von ThĂĽnen
1473:Economists
1372:Circuitism
1337:Humanistic
1332:Historical
1307:Ecological
1297:Democratic
1270:Chartalism
1260:Behavioral
1223:Mainstream
1184:Statistics
1179:Solidarity
1100:Managerial
1065:Humanistic
1060:Historical
1005:Ecological
970:Behavioral
789:2010-05-08
710:References
674:Sunk costs
667:irrelevant
540:Misconduct
166:Fair value
116:Management
58:Management
29:Accounting
1763:Greenspan
1728:Samuelson
1708:Galbraith
1678:Tinbergen
1618:von Mises
1613:Heckscher
1573:Edgeworth
1452:Stockholm
1447:Socialist
1347:Keynesian
1327:Happiness
1287:Classical
1248:Mutualism
1243:Anarchist
1228:Heterodox
1125:Personnel
1085:Knowledge
1050:Happiness
1040:Financial
1010:Education
985:Democracy
920:Empirical
830:Economics
665:Types of
654:Cash Flow
562:Hollywood
442:Financial
344:Cash-flow
101:Financial
1874:Category
1854:journals
1840:Glossary
1793:Stiglitz
1758:Rothbard
1738:Buchanan
1723:Friedman
1713:Koopmans
1703:Leontief
1683:Robinson
1568:Marshall
1418:Lausanne
1322:Georgism
1317:Feminist
1265:Buddhist
1255:Austrian
1154:Regional
1130:Planning
1105:Monetary
1035:Feminist
980:Cultural
975:Business
547:Creative
517:Research
447:Internal
434:Auditing
250:Goodwill
245:Expenses
96:Forensic
21:a series
19:Part of
1889:Outline
1860:Schools
1852: (
1813:Piketty
1808:Krugman
1673:Kuznets
1663:Kalecki
1638:Polanyi
1528:Cournot
1523:Bastiat
1508:Ricardo
1498:Malthus
1488:Quesnay
1391:Marxian
1282:Chicago
1212:history
1207:Schools
1194:Welfare
1164:Service
955:Applied
694:Example
512:History
406:Journal
265:Revenue
151:Accrual
1798:Thaler
1778:Ostrom
1773:Becker
1768:Sowell
1748:Baumol
1653:Myrdal
1648:Sraffa
1643:Frisch
1633:Knight
1628:Keynes
1603:Fisher
1598:Veblen
1583:Pareto
1563:Menger
1558:George
1553:Jevons
1548:Walras
1538:Gossen
1462:Thermo
1140:Public
1135:Policy
1090:Labour
1055:Health
753:
732:
651:Future
629:, and
457:Report
411:Ledger
354:Income
349:Equity
260:Profit
240:Equity
216:Assets
121:Social
86:Budget
1924:Costs
1884:Lists
1879:Index
1830:Lists
1803:Hoppe
1788:Lucas
1753:Solow
1743:Arrow
1733:Simon
1698:Lange
1693:Hicks
1668:Röpke
1658:Hayek
1608:Pigou
1578:Clark
1493:Smith
1408:Mixed
1367:Post-
1189:Urban
1169:Socio
1159:Rural
452:Firms
81:Audit
1819:more
1543:Marx
1533:Mill
1518:List
1396:Neo-
1352:Neo-
751:ISBN
730:ISBN
685:and
221:Cash
106:Fund
91:Cost
1783:Sen
1503:Say
1362:New
1095:Law
643:or
126:Tax
63:Tax
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782:.
717:^
635:A
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