When deciding whether to discontinue a segment of a business, relevant costs include ________.
A) auditing expenses for the whole company
B) fees paid to a management consultant to study the feasibility of the business segment
C) annual insurance costs of the company
D) future administrative costs that can be eliminated

Question

Quizplus · Accepted Answer

Relevant costs are those costs that will be affected by the decision to discontinue the segment. Future administrative costs that can be eliminated if the segment is discontinued are relevant costs, while auditing expenses, fees paid to a management consultant, and annual insurance costs are not directly affected by the decision and therefore, not relevant costs.

When Deciding Whether to Discontinue a Segment of a Business