CAF-5 · Chapter 14 · Question 1 of 10
According to the principles of decision-making, which of the following best defines a "Relevant Cost"?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: B) A future cash flow arising as a direct consequence of a decision.
Explanation
The study text clearly defines a relevant cost as a future cash flow that arises as a direct consequence of a specific decision. Past (sunk) costs, non-cash items, and committed costs are not relevant.
More Relevant Costs MCQs
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- Q4A specific job requires 50 kg of a special material, "Wire-D". The supplier only sells this material in minimum batch sizes of 60 kg at a…
- Q5A new contract requires 200 hours of direct labour in Department 1. The workforce in this department is paid a fixed weekly wage of Rs. 16…
- Q6A special order requires 900 hours of labour. The factory is working at full capacity. To complete the order, management must divert…
- Q7Which of the following costs should ALWAYS be treated as irrelevant when evaluating a short-term pricing decision for a special order?