Relevant Cost

Relevant cost can be defined as a managerial accounting term that is used to describe and explain the costs that are related to the management decisions. The man objective behind the concept of the relevant cost is that management requires data and information to take important decisions regarding the management and high level authorities. However the data and the information is available in the bulk quantity and such a huge quantity of data can also make the senior management or decision making team confuse. In order to avoid this confusion the only relevant data or relevant cost is collected from the bulk data so that management can make decisions on the basis of the selected data.

Relevant costs are the actual decision making costs and are relevant in the case of decision making. This means that these costs may be irrelevant in other cases except for the case where they are used for the decision making. Examples of relevant cost are the data require by the management to make decision whether to retain or sell a business unit that is apparently running in loss. In the same way decisions taken regarding the sell or purchase a product or any other item or accept a special order for manufacturing.

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