Question

According to our textbook, what criteria is used to determine whether a revenue or cost item...

  1. According to our textbook, what criteria is used to determine whether a revenue or cost item is "relevant"? (5pts)
  2. When evaluating short-term business decisions, explain why it is important to evaluate both quantitative (financial) and qualitative (non-financial) criteria. (5pts)
  3. Provide an example of a decision, including the quantitative and qualitative factors specific to that example. (5pts)
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Answer #1

The revenue will be relevant when it is revenue which is earned on that special order in addition to the existing revenue. Any addition to the existing revenue will be relevant. Even revenue foregone because of any decision will be relevant.

Variable cost is considered relevant as it is additional cost being incurred to make a product. Other cost will be considered as relevant if any of those cost increase due the decision being taken. The increase in that cost due to the decision will be considered relevant. Example an additional packaging expense of $50 will be incurred due to this special order will be considered as relevant cost.  

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