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Accounting Review

Historical costs are irrelevant for short-term non-routine decisions because they do not reflect future costs that impact decision-making. Relevant costs, which are expected future costs, are crucial for evaluating alternatives. While both quantitative and qualitative factors are important, quantitative factors are deemed more significant due to their measurable and financial nature.

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Jessalyn Dane
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38 views1 page

Accounting Review

Historical costs are irrelevant for short-term non-routine decisions because they do not reflect future costs that impact decision-making. Relevant costs, which are expected future costs, are crucial for evaluating alternatives. While both quantitative and qualitative factors are important, quantitative factors are deemed more significant due to their measurable and financial nature.

Uploaded by

Jessalyn Dane
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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1.

Why is it that historical costs are irrelevant as to making short-term non-routine


decisions?
In historical cost, the value of the asset is recorded at its original cost the time it
is acquired by the company, thus, historical costs are always irrelevant because they are
not future cost unlike relevant costs and it will not affect the decision. When we say
relevant cost, those are expected future costs that will be different among decision
alternative options and it will affect the final result or presentation. In making short-
term non-routine decisions, the decisions are made only within the provided capacity
time or limitations, so irrelevant costs are not considered in decision making.

2. Which do you think is more important as a factor when evaluating between two
alternatives, the quantitative or the qualitative factor? Explain.
Both quantitative factor and qualitative factor are useful in company’s evaluation
in different alternatives. When we say quantitative factors, the outcomes or data are
measured in numerical terms and easily expressed in monetary terms that’s why it is
commonly used in various financial analysis. One of the best examples of quantitative
financial factor is raw materials or direct materials while in qualitative factors the
common examples are employee’s perspective, competitive advantage of company,
quality of management and etc., which are not possible to quantify directly or cannot be
expressed in numerical terms.
Thus, in my point of view, quantitative factors are more important compared to
qualitative factors as a fact that in quantitative factors, data or information are
measurable and financial in nature. Decision makers or the management can provide an
accurate or relevant information.

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