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Relevant cash flows in DCF – Non–relevant costs – CIMA P2
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Hello, thank you very much for this worked example.
Could you please help me to understand how the cost of labour is reflected in the £174k? You remove £40k for labour when calculating the opportunity cost of reducing work in the other production department. Is labour considered a fixed cost over the year, and therefore committed and not relevant?
The 150k has been ‘lost’ whether or not they go ahead. It is better to only lose 24K than to have lost 150K
Hi there, thanks very much for this video. I just wanted to ask, if £150k was already spent to date and the cost to continue for one more year is £174k =£324k in total, we were only being paid £300k by the government therefore I thought it would be a £24k loss therefore would not proceed? Many thanks