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Hello Mr. Moffat,
How do I clearly distinguish relevant and irrelevant costs of a project ?
When are fixed costs considered relevant ?
When are variable costs considered irrelevant ?Relevant costs are those costs that will change as a result of doing a project.
Fixed costs are relevant if they change. Normally there is no mention of the total fixed cost changing, in which case they are irrelevant.
Variable cost are always likely to be relevant.
However, you can’t simply learn rules for this. The questions are testing your understanding, and so much depends on the actual wording of the question.
I suggest that you do watch my free lectures on relevant costing.
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