When using relevant cost analysis, it is a common mistake for untrained managers to include in their analysis all the following except:
A) Sunk costs.
B) Allocated fixed costs.
C) Average fixed costs.
D) Unit variable costs.
E) Total fixed costs.

Question

Quizplus · Accepted Answer

Unit variable costs are relevant in cost analysis because they change with the level of production or service activity, unlike sunk costs, allocated fixed costs, average fixed costs, and total fixed costs, which are typically not relevant for decision-making as they do not change with the decision at hand.

When Using Relevant Cost Analysis, It Is a Common Mistake