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Relevant cost: job costing and process costing.

What is the definition of relevant cost and how would it apply to both job costing and process costing. Incorporate this with direct costs such as material and labor and also indirect costs such as overhead (rent and utilities). Examples and references would be helpful.

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Relevant cost means that the cost changes between alternatives. Incremental costs to a decision are always relevant because by definition they have changed by an "increment"? based on some choice, activity, option or decision. So, defining what is relevant means that you must first indicate what decision or cost object you are interested in and then the relevant costs for that object or decision can be identified.

For job costing, the job cost is the typical item of interest. Relevant job costs include the materials consumed by that job and the labor worked on that particular job. The relevant job cost would also include the overhead assigned to the job based on the cost driver and predetermined overhead rate(s) used by the firm. Why? Because the material, labor and overhead applied to the job all ...

Solution Summary

Your tutorial is 478 words and includes three references. Examples are given of relevant costs in job costing, process costing, direct costs and indirect costs.