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Impact of Relevant Cost Knowledge on Students’ Short-Term Business Decision-Making Skills in Nigerian Universities

Abstract

This study examined the impact of relevant cost knowledge on students’ short-term business decision-making skills in Nigerian universities. Relevant cost knowledge refers to students’ understanding of the costs and revenues that are expected to change as a result of a particular business decision and their ability to distinguish such information from costs that remain unchanged. Short-term business decision-making skills refer to students’ ability to identify appropriate financial information, compare available alternatives, evaluate their possible consequences and select suitable courses of action within a short period. The study was motivated by the importance of relevant cost information in managerial decision-making and the need for Accounting Education students to develop practical skills for applying accounting knowledge to business situations. Short-term decisions often involve alternatives such as accepting or rejecting special orders, making or buying a product, continuing or discontinuing an activity and allocating limited resources. Students who possess adequate knowledge of relevant costs may therefore be better equipped to identify the financial information necessary for evaluating these alternatives. The study consequently investigated whether relevant cost knowledge has a significant impact on students’ short-term business decision-making skills in Nigerian universities. Relevant cost analysis is an important component of management accounting because not every cost recorded in the accounting system is useful for every business decision. Knowledge of avoidable costs, incremental costs, opportunity costs and relevant revenues can help students determine which financial information should influence a particular decision. Students who understand the distinction between relevant and irrelevant costs may be better able to avoid inappropriate decisions based on historical or unavoidable costs. This knowledge can also help them understand how changes in business activities may affect future costs and revenues. For Accounting Education students, competence in relevant cost analysis is particularly important because it provides a practical connection between management accounting concepts and the financial reasoning required for effective business decision-making. The study adopted a survey research design. The population comprised Accounting and Accounting Education students in selected Nigerian universities, from which an appropriate sample was selected using a suitable sampling technique. Data were collected through a structured research instrument designed to measure students’ relevant cost knowledge and short-term business decision-making skills. Relevant cost knowledge was examined in relation to students’ understanding of relevant costs, irrelevant costs, avoidable costs, unavoidable costs, incremental costs, opportunity costs and relevant revenues. Students’ short-term decision-making skills were considered in terms of their ability to evaluate special-order decisions, make-or-buy alternatives, product discontinuation decisions, resource allocation choices and other short-term business alternatives. The instrument was validated by experts in Accounting Education and related fields, while appropriate reliability procedures were used to establish its consistency. Data were analyzed using descriptive statistics such as frequency, percentage, mean and standard deviation, while an appropriate inferential statistical technique was used to test the research hypothesis at the 0.05 level of significance. The study is expected to establish that relevant cost knowledge has a significant impact on students’ short-term business decision-making skills. Students with adequate knowledge of relevant costs may be better able to identify the financial information that should be considered when evaluating alternative courses of action. Knowledge of avoidable and incremental costs can help students determine the additional financial consequences associated with a proposed decision, while understanding opportunity cost can enable them to recognize the benefits that may be sacrificed when one alternative is selected over another. Students may also be better prepared to disregard costs that will remain unchanged regardless of the decision. These competencies can provide students with a stronger basis for evaluating alternatives and making financially appropriate short-term business decisions. Furthermore, practical exposure to relevant cost analysis can strengthen students’ analytical reasoning, problem-solving and decision-making abilities. Classroom exercises involving special orders, make-or-buy decisions, product discontinuation, limiting-factor situations and resource allocation can provide students with opportunities to apply theoretical knowledge to realistic business problems. Students can be required to identify relevant information, compare alternatives, calculate the financial effects of different decisions and provide reasons for their recommendations. Such activities can help students move beyond memorizing definitions and develop the ability to interpret accounting information and apply it appropriately to specific business situations. Regular practical exercises can also improve students’ confidence in solving complex short-term decision-making problems. The findings will be useful to Accounting Education students, lecturers, curriculum planners and accounting departments in Nigerian universities. Students can benefit from developing practical knowledge of relevant costs and understanding how such information supports effective managerial decisions. Lecturers should provide regular exercises involving relevant and irrelevant costs, opportunity costs, incremental costs and realistic short-term decision-making scenarios. Accounting departments should also integrate relevant cost analysis into management accounting courses and assessments. Business case studies can expose students to practical situations involving special orders, outsourcing, production alternatives and resource limitations, thereby strengthening their ability to connect accounting information with business decisions. The study recommends that lecturers should combine theoretical instruction on relevant cost analysis with practical exercises, case studies and problem-solving activities. Students should be encouraged to understand not only the meaning of relevant costs but also how to identify and apply them when evaluating different business alternatives. Accounting departments should provide adequate learning resources and practical opportunities for students to analyze financial information and justify short-term business decisions. In conclusion, strengthening relevant cost knowledge can improve students’ short-term business decision-making skills and contribute to stronger cost analysis, analytical reasoning, financial interpretation, problem-solving ability, managerial decision-making competence, accounting knowledge and professional preparedness among Accounting Education students in Nigerian universities.

Keywords: Relevant Cost Knowledge, Short-Term Decision-Making, Business Decision-Making Skills, Relevant Cost Analysis, Accounting Education, Accounting Students, Relevant Costs, Irrelevant Costs, Avoidable Costs, Incremental Costs, Opportunity Costs, Relevant Revenues, Cost Analysis, Management Accounting, Special-Order Decisions, Make-or-Buy Decisions, Resource Allocation, Analytical Skills, Decision-Making Skills, Nigerian Universities.