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Hi Mr.John
Can you explain the differences between relevant and irrelevant cost? given an example
I assume you mean in relation to investment appraisal questions when calculating the NPV (which is the only place in F2 where relevant costing is asked).
Relevant costs are those that are used in making the decision – future extra cash flows, including opportunity costs (lost revenue due to the decision).
Irrelevant costs are those that are not used in making the decision – costs already incurred, non-cash costs such as depreciation.
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