Question

In making a decision, relevant costs include: a. unavoidable fixed costs. b. avoidable fixed costs. c. fixed factory overhead costs applied to products. d. fixed selling and administrative expenses.

Answer 1

Answer: Option(b) is correct.

Explanation:

Correct Option: Avoidable fixed costs.

A relevant costs refers to the costs that are related to the particular management decision and these costs will change in future corresponding to the change in decisions. While making a decision, relevant costs includes only avoidable costs and incremental costs which helps businesses. It helps in removing extraneous information from a procedure of decision making.