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Please tell me which cost is the relevant cost and the reason.
Sydney Co is considering whether to undertake some contract work for a customer. The machinery
required for the contract would be as follows.
(a) A special cutting machine will have to be hired for three months. Hire charges for this machine
are $75 per month, with a minimum hire charge of $300.Surely there is an answer and an explanation in the same book in which you found the question? !!!!
If there was no minimum charge then the relevant cost would be 3 months x $75 = $225
However since there is a minimum charge of $300, they will have to pay $300 and so this is the relevant cost.
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