Why Is Depreciation Expense Irrelevant to Most Managerial Decisions,even When

question 23

Essay

Why is depreciation expense irrelevant to most managerial decisions,even when it is a future cost?

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Definitions:

Accounting Period

A specific period of time used for financial reporting and analysis, often a quarter or a year.

Estimates

Approximations used in accounting when precise data is unavailable, often used for calculating allowances for doubtful accounts or depreciation.

Actual Overhead Cost

The real expenses incurred for overhead, including costs associated with running the business that are not directly tied to a specific product or service.

Overhead Applied

The process of assigning a portion of fixed and variable overhead costs to individual units of production.