Relevant cost diagram

tht diagram is find deprival value of non current asset.

there are 3 terms
1)replacement value,
it is the cost of the new asset if we were to purchase for replace the old asset.
2) value in use
it is estimated value the asset can generate if we operate it for useful life plus the cost of selling it after useful life(DISPOSAL COST)
3)net selling cost

first we have to compare,
value in use and net selling cost , take the higher amount
then compare this value with replacement cost, take the lower value.

this we have to find only if they ask for relevant cost of non current asset.

in some case, they ask for the relevant cost of a project which involve the non current asset, then no need to find the deprival value.

@abmy yes there is relevant costing for CBE Dec 2011 but it is only theory questions. simple definitions that’s all.

A question from the new BPP exam kit:

The following relates to relevant cos concepts in decision making:

1.materials can never have an opportunity cost whereas labour can.
2.the annual depreciation charge is not a relevant cost.
3. Fixed costs would have a relevant cost element if a decision causes a change in their total expenditure.

Which statements are correct?

A. 1 and 2 only
B. 1 and 3only
C. 2 and 3 only
D. 1, 2 and 3 only