What are the irrelevant costs?

Managerial Accounting assigns the term irrelevant costs of representation of commercial costs that do not affect the decision of the proceedings. These costs may be positive or negative and may include overhead costs, book value, drowned costs, imaginary costs, non -monetary costs or fixed costs. However, it is important to realize that irrelevant costs are not always irrelevant depending on the situation. In one decision, the costs of this decision may be set, but with another managerial decision, this costs may actually be relevant, ie the term relevant costs, which is specific to the decision. Given that irrelevant costs do not affect managerial decisions, the cost of most likely does not change this decision.

An example would be the salary of a marketing director. If the executive lines decide to restructure the marketing department in order to reduce costs and eliminate waste, the salary of relevant costs in this decision is relevantImming costs. Consideration of marketing directors Plast and how this amount affects the cash flow in the marketing department will probably be part of such a strategic decision, especially if the company decides this function outsourcing. On the other hand, if executive management tries to add the production arm to its business, the salary of the marketing director has no impact on such a decision and is therefore irrelevant costs.

In categorizing costs, many are considered irrelevant in relation to most business decisions. Such items without re -evaluation may consist of depreciation, amortization or other items that do not have an impact on the cash flow. In these cases, cash flow represents both cash and incoming into society. Regardless of the fact, howevervantifier.

As such, the conditions of money, as such, are not the only indicator of irrelevant costs in the process of managerial decision -making. Any situation that includes positive or negative will take some form of costs, even though these costs occur. Important in terms of managerial decisions is whether the related positive or negative impact on the decisions made. For example, lost production can be quantified in many ways except lost profits. Instead, quantification of production loss indicates a slower time to the new product market, and this can be more important for some types of strategic decisions than lost profits.