A general rule in relevant cost analysis is:
A)variable costs are always relevant.
B)fixed costs are always irrelevant.
C)differential future costs and revenues are always relevant.
D)depreciation is always irrelevant.

Question

Quizplus · Accepted Answer

The general rule in relevant cost analysis is that differential future costs and revenues are always relevant. This means that only costs and revenues that are affected by a decision are taken into account. Variable costs may or may not be relevant, depending on whether they change with the decision being made. Fixed costs may or may not be relevant, depending on whether they can be avoided or saved as a result of the decision. Depreciation may or may not be relevant, depending on whether it affects cash flow or taxes. Therefore, the most correct answer is option C.

A General Rule in Relevant Cost Analysis Is