• Skip to primary navigation
  • Skip to main content
  • Skip to primary sidebar
Free ACCA & CIMA online courses from OpenTuition

Free ACCA & CIMA online courses from OpenTuition

Free Notes, Lectures, Tests and Forums for ACCA and CIMA exams

  • ACCA
  • CIMA
  • FIA
  • OBU
  • Books
  • Forums
  • Ask AI
  • Search
  • Register
  • Login
  • ACCA Forums
  • Ask ACCA Tutor
  • CIMA Forums
  • Ask CIMA Tutor
  • FIA
  • OBU
  • Buy/Sell Books
  • All Forums
  • Latest Topics

20% off ACCA & CIMA Books

OpenTuition recommends the new interactive BPP books for September 2025 exams.
Get your discount code >>

relevant cost-interest cost

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA PM Exams › relevant cost-interest cost

  • This topic has 1 reply, 2 voices, and was last updated 13 years ago by John Moffat.
Viewing 2 posts - 1 through 2 (of 2 total)
  • Author
    Posts
  • April 24, 2012 at 5:31 pm #52351
    Vipin
    Member
    • Topics: 151
    • Replies: 374
    • ☆☆☆☆

    It is company’s policy to charge all contracts with notional interest at 8% on estimated working capital involved in contracts. (interest charge for contract A is 5120 and contract B is 6400).
    headquaters costs alllocated at rate of 5% on total contract costs on contract A is 12,676 and on contract B is 3240.
    both these costs are not taken as relevant costs.
    reason they gave is
    it is assumed that the notional interest has no cash flow implications.

    it is assumed that the HQ costs are not specific to particular contracts.

    I dont understand their reasons. thanks for your helping hand.

    April 24, 2012 at 6:17 pm #96764
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54699
    • ☆☆☆☆☆

    For relevant costing we are only interested in any extra costs that will be incurred by the company.

    Notional interest means ‘pretend’ interest. It means that we are not actually having to pay any extra interest – it is just charged for profit purposes. If we are not actually paying any extra interest then it is not relevant.

    With regard to the headquarters costs, the word ‘allocated’ simply means that we are charging part of the cost against the profit for the contract. We can do this for calculated profits in a profit statement, but it does not mean that we are actually paying any more in total. If the company is not paying out any more in total then it is not relevant.

  • Author
    Posts
Viewing 2 posts - 1 through 2 (of 2 total)
  • You must be logged in to reply to this topic.
Log In

Primary Sidebar

Donate
If you have benefited from our materials, please donate

ACCA News:

ACCA My Exam Performance for non-variant

Applied Skills exams is available NOW

ACCA Options:  “Read the Mind of the Marker” articles

Subscribe to ACCA’s Student Accountant Direct

ACCA CBE 2025 Exams

How was your exam, and what was the exam result?

BT CBE exam was.. | MA CBE exam was..
FA CBE exam was.. | LW CBE exam was..

Donate

If you have benefited from OpenTuition please donate.

PQ Magazine

Latest Comments

  • darshan.69 on Chapter 9 Pension Schemes TX-UK FA2023
  • darshan.69 on Chapter 9 Pension Schemes TX-UK FA2023
  • Jarzin on The Finance Function in the Digital Age – CIMA E1
  • dkessilfie on FM Chapter 1 Questions – Financial management objectives
  • ahmadhoney on ACCA Advanced Audit and Assurance (AAA) The Audit Report 3: Types of Audit Report

Copyright © 2025 · Support · Contact · Advertising · OpenLicense · About · Sitemap · Comments · Log in