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1) In relevant costing are we concerned about only incremental cost or do we also have to account for incremental revenue?
2) Variable cost is relevant because it is a cost that varies according to the production level?
3) Which of the fixed cost is relevant whether general fixed cost or specific fixed cost and what is the difference between both of them?
4) It is also correct that General overhead is actually general fixed cost but not specific fixed cost?
5) Is there any way specific way to calculate opportunity cost in paper PM? I don’t really understand what it is could you please explain in simple words?
Thanks for your time I appreciate that….
1. We are concerned with all incremental flows as as a result of doing to new work, both revenues and costs.
2. True. If more work is done then there is more variable cost.
3. General fixed costs stay the same in total whatever work is done. Specific fixed costs are only occurred if the relevant specific work is being done.
4. Yes.
5. An opportunity cost is the lost income as a result of doing new work. The calculation depends on the information in the question.
Have you watched my free lectures on all of this?
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