Differential analysis, also known as incremental analysis, is a decision-making technique that focuses only on the revenues and costs that differ between alternatives. The core principle is to ignore irrelevant information, which includes any costs or revenues that will remain the same regardless of the choice made. In the context of dropping a client, rent expense is typically a common fixed cost or committed fixed cost. The total rent for the office space will not change whether this specific client is retained or dropped. Therefore, it is irrelevant to the decision and should be excluded from the analysis.

B. Consulting fees: These are the direct revenues generated from the client. This income would be lost if the client is dropped, making it a critical differential item to include in the analysis.

C. Wages payable: These are variable costs directly tied to the hours worked for the client. Dropping the client would eliminate these wages, making them an avoidable cost and thus relevant to the decision.

D. Project management costs: These are costs incurred specifically to manage the client's account. These costs would be avoided if the client relationship is terminated, making them relevant to the differential analysis.

1. Heisinger, K., & Hoyle, J. B. (2012). Managerial Accounting. The Saylor Foundation. In Chapter 7, "How Are Relevant Costs Used to Make Decisions?", Section 7.3 discusses the "Keep or Drop a Segment or Product Line" decision. It states, "Common fixed costs are not eliminated if the segment is dropped and therefore are not relevant to the decision." Rent is a classic example of a common fixed cost that is allocated to segments but does not disappear if one is eliminated.

2. Garrison, R. H., Noreen, E. W., & Brewer, P. C. (2018). Managerial Accounting (16th ed.). McGraw-Hill Education. Chapter 13, "Relevant Costs for Decision Making," explains that unavoidable common fixed costs, such as rent for a factory in a segment elimination decision, are irrelevant because they will continue to be incurred even if the segment is dropped.

3. MIT OpenCourseWare. (2004). 15.501 Introduction to Financial and Managerial Accounting, Spring 2004. Lecture Notes, Session 23: Relevant Costs. The notes emphasize that relevant costs must be future costs that differ between alternatives. Sunk costs and future costs that do not differ (such as committed fixed costs like rent in many scenarios) are irrelevant.