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Financial & Managerial Accounting
Found in: Page 1049
Financial & Managerial Accounting

Financial & Managerial Accounting

Book edition 7th
Author(s) John J Wild, Ken W. Shaw, Barbara Chiappetta
Pages 1096 pages
ISBN 9781259726705

Short Answer

Google has many types of costs. What is an out-of-pocket cost? What is an opportunity cost? Are opportunity costs recorded in the accounting records?

The opportunity cost and the out-of-pocket both are the types of relevant costs.

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Step by Step Solution

Step 1: Definition of Relevant Cost

The future cost that varies between different alternatives is termed a relevant cost. The relevant cost is directly related to the decision-decision making.

Step 2: Meaning of out-of-pocket cost

Out of pocket cost is that which could be incurred by the team member initially or can be reimbursed to that team member depending on the management's decision

Step 3: Meaning of opportunity cost

An opportunity cost is the loss of benefits due to the action selected from many alternatives.

The opportunity cost is not recorded in the accounting records.

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