Question

Which THREE of the statements referring to relevant cost for short-term decision making are correct?

Select one or more:

A. A cost has to relate to the objective of the business in order to be relevant for short-term decisions.

B. Referring to the relevant cost of labour: if you have to choose between paying an overtime premium to existing workers and hiring additional contract workers from outside, you would choose the lower amount of the two to be included in your relevant-cost calculation.

C. Opportunity costs are never relevant in short-term decision making.

D. Historic costs are always relevant in short-term decision making.

E. Future outlay costs that do NOT change with the decision are irrelevant for short-term decisions.

Answer 1

The correct statements are:-

A. A cost has to relate to the objective of the business in order to be relevant for short-term decisions.

B. Referring to the relevant cost of labour: if you have to choose between paying an overtime premium to existing workers and hiring additional contract workers from outside, you would choose the lower amount of the two to be included in your relevant-cost calculation.

E. Future outlay costs that do NOT change with the decision are irrelevant for short-term decisions.