Management accountants can help support the quality initiatives of management by supplying decision makers with relevant financial information regarding these initiatives. Which of the following statements is true regarding costs that are relevant for decision making within this context?
A) Relevant costs are variable costs.
B) Relevant costs are fixed costs.
C) Relevant costs include out-of-pocket but not opportunity costs because the latter are not recorded by accounting systems.
D) Relevant costs are future costs that differ between (or across) decision alternatives.
E) Relevant costs would not include estimated losses due to reduced market share.

Question

Quizplus · Accepted Answer

Relevant costs are future costs that differ between decision alternatives. It is important to consider these future costs when making decisions about quality initiatives. Option A is incorrect as fixed costs may also be relevant in certain circumstances. Option B is incorrect as opportunity costs can also be relevant. Option C is incorrect as opportunity costs should also be considered. Option E is incorrect as estimated losses due to reduced market share can be relevant in certain situations.

Management Accountants Can Help Support the Quality Initiatives of Management