Why do you think it is important to only consider only relevant costs when conducting a differential analysis? Why not consider all possible costs in your decision. Be sure to provide examples to back up your ideas.
TOPIC: Differential Analysis
Answers:
Differential cost is the difference between the cost of two alternative decisions, or of a change in output levels. The concept is used when there are multiple possible options to pursue, and a choice must be made to select one option and drop the others.
For Example: Differential costs are either fixed or variable.
Fixed costs include salary, commission and other known expenses.
Variable costs include advertising, depreciation and other expenses that can only be estimated.
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