Answer
Two potential problems to avoid in relevant cost analysis are:
1. Don't assume all variable costs are relevant and all fixed costs are irrelevant. Some fixed costs, such as lease payments for a facility, may be relevant in certain decisions.
2. Avoid using unit-cost data directly, as it can be misleading. Unit costs may include both relevant and irrelevant costs, and comparing unit costs at different output levels can lead to incorrect conclusions.
Work Step by Step
Two potential problems to avoid in relevant cost analysis are:
1. Don't assume all variable costs are relevant and all fixed costs are irrelevant. Some fixed costs, such as lease payments for a facility, may be relevant in certain decisions.
2. Avoid using unit-cost data directly, as it can be misleading. Unit costs may include both relevant and irrelevant costs, and comparing unit costs at different output levels can lead to incorrect conclusions.
