Relevant cost
A relevant cost changes between the alternatives in a decision and relates to future resources or cash consequences rather than merely a historical accounting charge. Begin by defining the options and identifying which amounts differ. Sunk costs and unchanged allocations are excluded. The decision also needs non-financial considerations and any scope-specific opportunity costs where applicable; an accounting cost per unit is not automatically the amount gained or lost by choosing an option.
Worked example
A one-off order needs newly purchased material costing $800 and extra labour $500. Existing rent stays unchanged. Relevant additional cash cost is $1,300 before other stated effects.
Common mistake
A future cost is not relevant merely because it occurs later: if its amount is identical under both options, it does not affect the comparison.
Where it appears in your exams
| Qualification | Exam | Relationship | Period |
|---|---|---|---|
| ACCA | PM | Direct | September 2026–June 2027 |
