Cost Management: A Strategic Emphasis 5th Edition by David Stout, Edward Blocher, Gary Cokins

Exercise 32

Sweet Dream Hotel has labor costs that are mostly fixed, including registration desk, maintenance, and general repairs and cleaning. The housekeeping staff is hired in sufficient numbers to clean the rooms that need cleaning, so that housekeeping is a variable cost for the number of occupied rooms. Which of these costs is relevant for determining the price of a room?

Step 1 of 2

Relevant costs: Relevant costs are the costs that differ with choices. The costs that are relevant for decision making of either to choose the option or to go for other option are known as relevant costs.