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When should he or she consider the cost relevant if a management accountant is trying to decide whether a cost is relevant to a decision?

When should he or she consider the cost relevant if a management accountant is trying to decide whether a cost is relevant to a decision?

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1. It is a historical cost precise in nature.
2. It is a historical cost that is the same among all alternatives.
3. It is an expected future cost that is the same for each alternative.
4. It is an expected future cost that is different for each alternative.

This question is part of Accounting loves you!
Asked by Alanaseeto, Last updated: Feb 19, 2020

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2 Answers

Chris Kenway

Chris Kenway, Content Writer, Jacksonville

Answered Jun 27, 2018

A management accountant should consider the cost relevant when the expected future cost will be different for each option. It should be remembered that there are different paths that things can undergo. The choice that will be made by the management accountant now will have an impact on what the future is going to be. The different alternatives will be enough for the businesses to have a choice.

There are some businesses that fail because the managers failed to recognize the best option available depending on the business’ finances and all the other factors that ought to be considered. In making decisions, the goals and objectives of the company should be taken into account too.

 

John Smith

John Smith

Answered Apr 29, 2017

It is an expected future cost that is different for each alternative.
 

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