Relevant Cost

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DEFINITION of 'Relevant Cost'

A managerial accounting term that is used to describe costs that are specific to management's decisions. The concept of relevant costs eliminates unnecessary data that could complicate the decision-making process.

BREAKING DOWN 'Relevant Cost'

Relevant costs are decision specific, meaning that a relevant cost may be important in one situation but irrelevant in another. Examples of when management uses relevant costs can be seen when it is determining whether to sell or keep a business unit, make or buy an item, or accept a special order.

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