Relevant-cost pricing
Relevant-cost pricing uses the changed future costs and benefits of an order or option to identify a short-run financial boundary for a price decision. Spare capacity, additional fixed costs, displaced contribution and selling consequences can all matter. A price covering relevant cost may improve short-run profit but may not cover long-run resources or preserve normal market prices. Quality, customer relationships and strategic effects still require evaluation.
Worked example
With genuine spare capacity, an order adds $800 materials and $500 labour with no other changing cost. A price above $1,300 adds financial contribution on those assumptions.
Common mistake
A short-run minimum is not a sustainable standard selling price or permission to ignore scarce-resource opportunity cost.
Where it appears in your exams
| Qualification | Exam | Relationship | Period |
|---|---|---|---|
| ACCA | PM | Direct | September 2026–June 2027 |