Decision for Add or Drop Product or Division. Cost Accounting Course. CPA Exam BAR. CMA Exam
Channel: Farhat Lectures. The # 1 CPA & Accounting Courses
Date: 2020-09-23

An add or drop decision is based only on the relevant costs involved in the process. A decision whether or not to continue an old product line or department, or to start a new one is called an add-or-drop decision. An add-or-drop decision must be based only on relevant information. Relevant information includes the revenues and costs which are directly related to a product line or department

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As we have discussed earlier, some costs are not relevant to a decision, so as we look at options between our product lines, we need to decide which costs should be considered as decisions are made.