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At the split off point of two products, if one is to be processed further, are the costs of the prior process relevant? Also, in service organizations, are the differential costs in doing an alternative service relevant?
This came in my exam and I said no to the first and yes to the second
In answering these types of questions about relevant costs, it is important to consider whether the cost in question is a future cost, avoidable and a cash flow. If it is all of these is yes then it is a relevant cost. So to the first part of your question I would agree that since it is a past cost it is not relevant. I would need further details to determine the answer to second part of your question.
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