Which of the following should management consider to avoid the pitfalls of relevant-cost analysis?
A)Consider all current revenues and costs.
B)Include any item of revenue or cost that is either an expected future revenue or expected future cost, and, differs between the alternatives.
C)Historic revenues and costs for items that differ according to alternatives should be considered.
D)Assume that all fixed costs are irrelevant.
E)Assume that all variable costs are relevant.

Question

Quizplus · Accepted Answer

Management should consider all future revenues and costs that differ between the alternatives when conducting relevant-cost analysis. Historic revenues and costs may not be relevant if the decision involves a future opportunity or investment. Additionally, fixed costs may still be relevant if they are avoidable or if they differ between the alternatives. Finally, not all variable costs may be relevant if they do not differ between the alternatives being considered.

Which of the Following Should Management Consider to Avoid the Pitfalls