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Hello,
I had submitted this on the video page but i thought i should ask here.
Can you please advise in example 2 under Relevant costing why 10000kg was not used, and we used 7500kg instead?
You mentioned 7,500kg was already purchased sometime ago, so not relevant.
Thanks
The 10,000 kg of material was not used because the relevant cost focuses on the material that is necessary for the specific contract or project at hand.
The 7,500 kg was mentioned as it represents the amount that could potentially be used for the contract, but since it was purchased in the past, it is considered a sunk cost and therefore not relevant to the decision-making process.
The relevant cost should reflect the current purchase price of any additional material needed.
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