Copyright

To decide to adopt a short term decision such as to drop a segment, you should consider which...

Question:

To decide to adopt a short term decision such as to drop a segment, you should consider which types of costs?

a. Sunk costs

b. Past costs

c. Historical costs

d. Variable costs

Decision Making:

Decision making related to keeping a segment or dropping a segment is based on relevant cost analysis. The incremental approach is preferred for such decision making.

Answer and Explanation:

The correct answer is option (d).

To decide to adopt a short term decision such as to drop a segment, variable costs are considered.

Explanation: To decide to adopt a short term decision such as to drop a segment, variable costs are considered as the sunk cost (which is the past cost or historical cost) is irrelevant for this type of decision making. The variable costs are relevant for this type of decision.


Learn more about this topic:

Loading...
Relevant Costs in Eliminating a Product or Segment

from Accounting 301: Applied Managerial Accounting

Chapter 9 / Lesson 12
1.3K

Related to this Question

Explore our homework questions and answers library