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11.7: Why It Matters- Relevant Revenues and Costs

  • Page ID
    45949
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    Why learn to determine relevant revenues and costs?

    Knowing which costs are important and which we can ignore when making decisions will save time in the decision making process and also make it more effective. Some costs don’t make a difference, but unfortunately, there is no clear guide for which ones matter and which ones don’t.

    Only with experience and practice, can a manager learn which costs are relevant to a decision. Learning the process is important for the profitability of your company and to make the best use of resources.

    Sunk costs, opportunity costs and avoidable and unavoidable costs all need to be understood to determine what the differential costs are when you make decisions about adding or dropping a product line, making or buying a component part or figuring out how to best use a constrained resource.

    CC licensed content, Original
    • Why It Matters: Relevant Revenues and Costs. Authored by: Freedom Learning Group. Provided by: Lumen Learning. License: CC BY: Attribution

    11.7: Why It Matters- Relevant Revenues and Costs is shared under a not declared license and was authored, remixed, and/or curated by LibreTexts.

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