Relevant Costing: Can the Method Coincide with Different Industries?

Abstract

In management accounting, relevant costing is a well-known method used to assess the feasibility of production decisions in the short-run. It can be applied to a number of specific decisions in various types of industries namely manufacturing, service, and not-for-profit organizations. However, this concept has not been widely used in agriculture. This paper reviews a case for using relevant costing approaches in agriculture and how this accounting concept can be applied to other organizational contexts. Relevant costing has been proposed to be more useful in agriculture as opposed to the traditional methods of cost analysis commonly used by the farms. Applications of relevant costing techniques in agriculture have been critically analyzed arguing that the nature of agricultural business and the assumptions of relevant costing do not really coincide. This makes the concept inappropriate for use in agriculture to a large extent. The paper further tries to assess cases with appropriate examples for different organizations where relevant costing techniques can be applied.

Keywords: Relevant Costing, Agriculture, Decision-Making, Break-Even Analysis, Management Accounting

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