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Why do you think it is important to only consider only relevant costs when conducting a...

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

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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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