Cost Management: A Strategic Emphasis 5th Edition by David Stout, Edward Blocher, Gary Cokins

Exercise 9

Why are variable costs usually more relevant than fixed costs in short-term decision making?

Step 1 of 2

In an organization short term and long term plans will be decided in the initial planning process itself. This will help in allocating the budget and the resources. As the uncertainty in the process cannot be predicted, the management will be forced to take short term decisions to tackle the issues. While doing so the cost involved in the process should also be taken in to consideration.