Show model answer and explanation
400
1000−600.
Class 12 · English Version · Accounting
Costs, budgets and interpretation
Use relevant costs rather than all historical costs in a short-run comparison.
Original Kidemy further-topic investigation. This optional lesson is shared by related upper pathways; select suitable depth with a teacher. It does not certify complete grade or board coverage.
Learn the idea
A relevant cost changes between alternatives for the decision being considered. A sunk cost has already been incurred and cannot be changed by the choice. Opportunity cost can matter even without a cash payment. Capacity and commitments must be stated before excluding costs.
Worked example
A past design fee300 is unrecoverable. A new order brings1000 revenue and needs600 additional materials and labour. Under spare-capacity assumptions with no other changes, incremental contribution is 400; the old fee does not change between accepting and rejecting.
- Define the alternatives.
- Identify avoidable and forgone amounts.
- State capacity and missing costs.
Your written practice
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Show model answer and explanation
400
1500−1100.
Show model answer and explanation
sunk cost
It cannot be changed by this choice.
Write in your own words. A guardian or teacher should review this response.
Show model answer and explanation
The order may not alter the committed cost, while exceeding capacity could require an additional fixed outlay.
State the activity range and alternative.
Write in your own words. A guardian or teacher should review this response.
Show model answer and explanation
The forgone contribution from the displaced order is part of the decision comparison.
Include the alternative use of capacity.
Apply the idea
Compare two fictional orders and show which costs change under each option.
Review with a guardian or teacher
- Use the stated evidence or givens.
- Show reasoning rather than only a result.
- Review and explain one correction.
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