Final answer:
A future cost must relate to the objectives of the business to be relevant to a decision. This is because decisions are made based on how they will influence the achievement of the company’s goals, such as profitability or market positioning.
Step-by-step explanation:
To be relevant to a decision, a future cost must relate to the objectives of the business. This is because business decisions are generally focused on achieving specific goals, often related to maximizing profitability or shareholder value. Decisions are considered based on how they will affect these objectives, and any future costs need to be evaluated in terms of their impact on the company's goals. This includes how these costs will influence the production and cost conditions as well as the market structure within which the firm operates.
In essence, relevance to decision-making implies that only the costs and benefits that alter based on the choice at hand should be included in the analysis. This ties into the concept that sunk costs, which are costs that have already been incurred and cannot be recovered, should not influence current or future business decisions. Reflecting on this context, all decisions should consider the incremental changes associated with the decision, and their alignment with the overarching business objectives.