Question

Which of the following provides a key in analyzing short-term business decisions?

A) focus on costs that do not change under two alternatives and on historic costs
B) focus on qualitative data only and ignore future cash flows
C) focus on sunk costs and quantitative data
D) focus on relevant costs and use the contribution margin approach

Answer 1

D) focus on relevant costs and use the contribution margin approach

Step-by-step explanation:

When it comes to short term decision making, the priority is set right by placing emphasis on relevant costs which are incremental future costs.

This is coupled with the contribution margin approach where only the variable costs are considered(without fixed costs), since the short-term is a period that fixed costs remain the same.