Certified Management Accountant 2025 – 400 Free Practice Questions to Pass the Exam

Question: 1 / 430

What defines irrelevant costs in a decision-making scenario?

Costs that affect one alternative but not another

Costs that differ between alternatives

Costs that do not differ between alternatives

Irrelevant costs in decision-making are defined as costs that do not differ between the alternatives being considered. When evaluating various options, only the costs that change as a result of the decision are relevant; those that are the same for all options do not impact the decision at hand. Since irrelevant costs remain constant regardless of the chosen alternative, they do not contribute to the evaluation of the benefits or burdens of a specific choice.

When analyzing a decision, it is crucial to focus on costs that will vary as a result of the decision-making process. Irrelevant costs do not influence the outcome because they will not change regardless of which alternative is selected. This understanding helps in concentrating the decision-making process on the most significant factors that will actually affect the final outcome.

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Future costs that can be avoided through different choices

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