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Class notes

Relevant Costing notes

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9 pages
2025/2026 Written for academic year
Institution University Of Toronto (U Of T )
Course RSM222 (RSM222)
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Relevant costing notes in complete detail with a solved practice question in the end.

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WEER 10
RELEVANT COSTING


What makes a costrelevant
1 It differsbetween alternatives
2 It relates to thefuture

Irrelevantitems
chunkcosts
Allocatedfixedcosts
Costsidenticalunderbothoptions



Typical BuinessDecisions
1 SpecialOrders
Accept if incrementalrevenue incremental cost
If at full capacity include opportunityoflostregularsales

2 Keep or Drop a Product clegment
Drop if Available costsavings lost contribution margin
Alsoconsider
Impactonotherproducts
Alternative use
offreedspace machines
3 Make or Buy
Make when Costs to make purchaseprice
Cost tomakeinclude
All variablecosts
Avoidablefixedcosts
Opportunitycost
ofusingresources
4 Sell or ProcessFurther
Process
further if Incremental revenue incrementalprocessingcost

Jointcosts always irrelevant

, 5 Scarce Resource allocation
Rank products
by
1 Contribution marginper unit of constrained resource
2 Produce in thatorder untilresource is exhausted


6 JointProducts
Jointcostsareirrelevantbecause theydo not changeaftersplit off
Decisiondependsonlyon incremental
analysis

Document information

Study
Finance and Economics Specialist
Uploaded on
December 11, 2025
Number of pages
9
Written in
2025/2026
Type
Class notes
Professor(s)
Scott douglas
Contains
6-12
Report Copyright Violation
CA$7.46
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