Hello Sir ! I hope you are having a great day sir.
Sir can you please explain me, in your lecture for relevant costing for materials part, when $7500 ( which is the suck cost ) is not relevant, why have you considered it while totaling them?
I am confused...
Please advise me on this issue sir.
Beat Regards.
Ask the Tutor ACCA PM
RELEVANT COSTING
5y ago#1I assume you are referring to example 2 (where it is 7,500 kg, not $7,500).
The original cost was $34,000 and this is irrelevant as it is a sunk cost.
However if the inventory was not being used in the special order then it could be sold for $4.20 per kg.
Therefore it if is used in the order then we lose income that we could otherwise have received (so an opportunity cost) of 7,500 x $4.20.
Sign in to reply to this topic.