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For The non current asset that is idle- the relevant cost will be decrease in the NRV if the asset is used in the project. Also opportunity cost will be zero.
For the non current asset that is fully utilised the relevant cost is deprival value. From what I have understood its lower of replacement cost and recoverable amount (higher of value in use or disposal value). Do we consider the opportunity cost lost if the fully utilised asset is taken away and used ? I think here opportunity cost is same as the value in use in the above formula( I suppose ) or the opportunity cost should be dealt seperately. I am confused. It has been asked in the exam quite few times now but i use kaplan and this topic is dealt very briefly.
Do not just learn rules for relevant costing. Instead think through the logic.
Ask yourself what would they do with the asset if it was not to be used in a new project. Would they sell it or would they keep it? The would do whichever gave the biggest benefit.
Having decided what they would do and therefore what the benefit would be, this is then the relevant cost if instead it is taken to be used in the new project.
Have you watched my lectures on relevant costing? (Are you watching any of the lectures, because they are a complete free course and cover everything needed to be able to pass the exam well. If you are watching the lectures then you do not really need the Study Text. The essential book – however you choose to study – it the Exam/Revision Kit because it is full of past exam and other exam standard questions for practice, and practice once you have finished studying is vital for passing the exam.)
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