Question

demonstrates a nuanced understanding of the relationship between optimal cost allocation and relevant costs

Answer 1

In order to get a nuanced understanding of the relationship between optimal cost allocation and relevant costs we first need to understand the optimal cost allocation and relevant costs separately in terms of their significance. The below is key information about optimal cost allocation and relevant costs.

Optimal Cost Allocation;

Optimal cost allocation is a method of cost allocation that strikes in analysing the use of scarce resources that can be assigned in an efficient manner that could positively result in terms of units generated by the organisation.

Relevant Costs;

A concept of relevant cost is mainly focus on eliminating unnecessary information from a particular decision-making process. The terms “eliminating unnecessary information” refers to eliminating irrelevant costs from a decision-making perspective. Under this concept the management is prevented from using the information that could affect management decision incorrectly.

As discussed above, the Optimal cost allocation is a method that involve a systematic process of assignment of scare resources in efficient way to generate better result in terms of productivity and quality. However, the relevant cost focus on eliminating the irrelevant cost information that could be required to make a decision.

Hope this clarifies!