Which of the following statements is TRUE when making a decision between two alternatives?
A)Variable costs may not be relevant when the decision alternatives have the same activity levels.
B)Variable costs are not relevant when the decision alternatives have different activity levels.
C)Sunk costs are always relevant.
D)Fixed costs are never relevant.

Question

Quizplus · Accepted Answer

Variable costs may not be relevant when the decision alternatives have the same activity levels because they will be the same for both alternatives and will not impact the decision. Sunk costs, on the other hand, are not relevant because they are costs that have already been incurred and cannot be recovered, so they should not be considered in a decision-making process. Fixed costs may or may not be relevant depending on the specific decision being made.

Which of the Following Statements Is TRUE When Making a Decision