For a short-term production decision, which cost is relevant?
Correct answer: C. A future cost that changes between alternatives
- A. The original cost of an old machine
- B. An unavoidable factory rent
- C. A future cost that changes between alternatives
- D. Depreciation already recorded in the books
Explanation
A relevant cost is a future cost that differs between the available alternatives. The other costs do not change because of the short-term decision and are therefore not relevant.
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About Cost Accounting
Cost accounting measures and analyses the cost of producing goods or providing services for planning, control and pricing decisions. It covers direct and indirect costs, fixed and variable costs, job and process costing, break-even analysis, marginal costing, overhead allocation, and the difference between product cost and period cost.
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