5.4.3—Cost information uses

Managers use cost information to set prices, prepare budgets, compare alternatives, control waste and evaluate performance. The useful measure depends on the decision and time horizon.

Relevant costs are future costs that change between options; sunk costs should not drive a new decision, while opportunity costs capture what is forgone.

When deciding whether to accept a one-off order, spare capacity and incremental cost matter more than a historical development cost that will not change.

A full allocated cost can be useful for reporting but misleading for a short-term decision if it does not change.