relevant costing

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June 11, 2020 at 6:12 am #573426
AverageAndy
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Bronty Co is considering whether to undertake some contract work for a customer. The machinery required for the contract would be as follows:

A special cutting machine will have to be hired for three months for the work (the length of the contract). Hire charges for this machine are $75 per month, with a minimum hire charge of $300.

Sir can you specify what will be the relevant cost in this case, and why exactly?
June 11, 2020 at 11:25 am #573448
John Moffat
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Why are you attempting questions for which you do not have an answer? You should be using a Revision Kit from one of the ACCA approved publishers – they have answers and explanations!

The relevant cost is $300 because this is how much they would have to pay to hire the machine.

Have you watched my free lectures on relevant costing?
June 12, 2020 at 2:35 am #573541
AverageAndy
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Sir why are $75 of monthly hire charges not considered relevant?
June 12, 2020 at 10:29 am #573569
John Moffat
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Because they have to pay $300 which is the minimum they will be charged (and is more than 3 months at $75 per month).
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