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hi all,
can anyone please tell me why did the examiner include the license renewal fee of 150,000pound in 1st dec2oo8 and not in dec 2007, as i think it is a non relevant cost as it has already been incurred in earlier years and therefore should not be included in the calculation.
please help
thankx in advance- Topics: 0
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To be a relevant cost, it must be avoidable AND incremental among options.
Firstly, you must be clear on what are the decision that Wonderland has to make: The effective date of taking up the transportation service by NSC, 1 December 2007 or 1 December 2008? (Options are these 2 effective dates)
The £150,000 licence fee is avoidable if the effective date is on 1 December 2007, which is the licence renewal date according to Note (2).
Instead, the licence fee is unavoidable (appear so under the 2008 column) if the effective date is on 1 December 2008. The licence fee, therefore, is incremental between the 2 effective dates.
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