Question

The cost of a special device that is necessary if a special order is accepted is a?

Answer 1

Answer:

attached here your answer

Answer 2

Answer:

Concept:

Cost is defined as the previously mentioned expenses that were incurred or may be incurred in order to achieve the management's goal, which could be the production of a good or the provision of a service. Cost refers to the sum of all costs associated with a good or a service.

Explanation:

• Cost is a monetary measurement of the quantity of resources used for a particular purpose.
• It is the amount spent (actual or hypothetical) on or related to a particular item or activity.
• Money or monetary units are used to express the so-called resources.
• Cost of an article, then, refers to the expenses actually incurred during its production and sale. It is, in essence, the quantity of resources expended in exchange for certain goods or services.
• Costs can also be categorised based on the time component they contain.

Historical cost:

• Costs that are considered after they have been incurred are known as historical costs. This is particularly feasible if a specific unit of output has already been produced. They don't help with cost control and only have historical value.

Pre-determined cost:

• Estimated costs are predetermined costs. These expenses are calculated in advance using historical data and experience.

Opportunity Cost:

• It is the anticipated cost shift brought on by the use of a different machine, process, raw materials, specification, or operation. In other words, it represents the highest amount of earnings that could have been made if the capacity had been used in a different manner.

Relevant cost:

• In managerial accounting, the term "relevant cost" refers to avoidable expenses that are only incurred in connection with particular business decisions.
• The idea of relevant cost is used to cut out extraneous information that might make decisions more difficult.
• Consider the decision of whether to sell or keep a business unit using relevant cost as an example.

Sunk cost:

• It is the cost incurred in the past as a result of a choice that cannot be changed at this time and is linked to specialised equipment or other facilities that are difficult to adapt to current or future needs.

• Such a cost is frequently viewed as playing a small role in choices that will affect the future.
• A sunk cost is the opposite of a relevant cost; it has already been paid for regardless of how the current choice turns out.

If a special order is accepted then  the cost of special device is relevant cost.

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