An Evaluation of Some Criticisms of Relevant Costing.

Abstract The article presents an evaluation of some criticisms of relevant costing. In the October 1963 issue of the journal The Accounting Review, professor William L. Ferrara described issues on relevant costing relatively dispassionately and isolated essential differences. Basically, Ferrara considered service potential as realizable value while researchers identify it as opportunity cost. Differences of opinion probably cannot be resolved by further discussion. The October 1963 Accounting Review also contains an article by Professor Phillip E. Fess. The first paper in the journal showed empirically that after an inventory build-up in a given year, sales in the following year are as likely to decrease as increase. Thus, researchers have some empirical evidence for questioning the additional benefit of utilizing fixed factors to increase inventory. Researchers take the position that relevant costing is appropriate for both long-run and short-run reporting. The primary goal of relevant costing is neither maximization nor minimization of income. Its primary goal is to describe the economic impact of business events.