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A company is making product p with the following cost card.
Hope u find this question sir could you explain how the calculation is made for relevant cost.I am not able to understand the concept.Thanks in advance.By diverting machine time and labour to another product they lose production of product P.
Therefore they lose the revenue of 100. Since the are not making product P they save the materials of 25. (They will still pay the labour and variable overheads).
Therefore the lose 75 and this is the relevant cost of taking the labour and machine time.
I explain this logic in my free lectures on relevant costing. The lectures are a complete free course for Paper PM and cover everything needed to be able to pass the exam well.
Thanks a lot sir .Your explanations are amazing.I was just confused with the explanations given in the book.God bless you .
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