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relevant and irrelevant cost

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA MA – FIA FMA › relevant and irrelevant cost

  • This topic has 1 reply, 2 voices, and was last updated 6 years ago by John Moffat.
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  • February 28, 2016 at 7:39 pm #302493
    Rasad
    Member
    • Topics: 55
    • Replies: 45
    • ☆☆

    Hi Mr.John

    Can you explain the differences between relevant and irrelevant cost? given an example

    February 29, 2016 at 8:06 am #302540
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 51538
    • ☆☆☆☆☆

    I assume you mean in relation to investment appraisal questions when calculating the NPV (which is the only place in F2 where relevant costing is asked).

    Relevant costs are those that are used in making the decision – future extra cash flows, including opportunity costs (lost revenue due to the decision).

    Irrelevant costs are those that are not used in making the decision – costs already incurred, non-cash costs such as depreciation.

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