Consider a decision facing a company of either accepting or rejecting a special offer for one of its products. A cost that is not relevant is:
A) direct materials.
B) variable overhead.
C) fixed overhead that will be avoided if the special offer is accepted.
D) common fixed overhead that will continue if the special offer is not accepted.

Question

Quizplus · Accepted Answer

Common fixed overhead that will continue if the special offer is not accepted is not relevant because it would be incurred regardless of whether the special offer is accepted or rejected. The relevant costs are those that will change depending on the decision made, such as direct materials and variable overhead. Fixed overhead that will be avoided if the special offer is accepted is also relevant because it will change depending on the decision made.

Consider a Decision Facing a Company of Either Accepting or Rejecting