Page 140 - 5.2 i. Manac Costing ITC Summarised Notes
P. 140
DECISION MAKING
Assumptions
Unless you are given an indication to the contrary, you can
assume the following:
• Variable costs will be relevant
• They are avoidable – if you cease production they are not incurred
• Fixed costs are only relevant if they are incremental
• i.e. if they arise as a direct result of the decision
• Committed fixed costs = future spending already committed to by
decisions made in the past = not avoidable, therefore not relevant.
• Discretionary fixed costs = management can use discretion as to
whether or not costs must be incurred = avoidable, therefore
relevant.
140
