7. Decision Making

Relevant Costs — Quiz

Test your understanding of relevant costs with 5 practice questions.

Practice Questions

Question 1

Which of the following costs will always be considered relevant for decision-making?

Question 2

A company has already spent $$ \$10,000 $$ on developing a new product. This cost cannot be recovered. When deciding whether to continue with the product launch, how should this $$ \$10,000 $$ be treated?

Question 3

A business is considering two projects. Project A requires the use of a machine that could otherwise be rented out for $$ \$500 $ per month. Project B does not require this machine. The $ \$500 $$ per month rental income foregone if Project A is chosen is an example of a(n):

Question 4

In the context of a 'make or buy' decision, which of the following costs is most likely to be a relevant cost?

Question 5

A company has inventory of raw materials that cost $$ \$2,000 $$. These materials are now obsolete and have no alternative use. If used in a special order, their relevant cost is: