Question

1) How would you define relevant decision analysis? More specifically what needs to be analyzed with this decision analysis?

2) Please list the 5 or more types of decisions that can make use of the relevant decision approach?

Answer 1

1. Relevant decision analysis is a type of decision making process in which all those relevant cost which are important for the decision-making are to be considered and all such irrelevant cost are discarded out of the decision making process.

Relevant decision analysis is always important for making decisions in respect to various kinds of project which are to be undertaken by the company and these are used for acceptance on the rejection of the project.

one needs to analyse the overall incremental cost and incremental benefits associated with project and he will not be considering any kind of sunk cost because they have been incurred in the past.

hence the relevant decision making will only undertake relevant cash flows and other risk for decision making

2. five or more decisions that can make use of the relevant decision approach are as follows-

A. Purchase of the machinery

B. Entering into a new manufacturing of product

C. Entering into a new product line

D. Diversification of business

E. Mergers and acquisition