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Dear John,
Just a quick question regarding one exam mcq question.
It was a one off contract and the question stated that
general overheads are allocated by headoffice to every projects.
We had to choose from the below three options regarding the general oh cost:1, it is relevant
2, it is comitted
2, it is sunkFor me relevant cost is the cost which occurs because of the new project
Comitted is when a cost relates to future.
Sunk cost is occurred in the past and not relevant to the new project.Thanks very much.
Kind regards,
Katalin
On the basis of what you have typed, then the answer is 2 (committed).
The overheads in total will still be payable whether or not the particular project is undertaken (and therefore are not relevant).
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