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Good afternoon Sir,
I hope you are having a great day
In relevant costing example two we include the interest for the overdraft of 20.000 in relevant costing and that makes total sense, but in Kaplan study material we are told to ”exclude financing cash flows (e.g. interest)” which made me a bit confused. Could you please advise if there was a recent change or is it just an oversight on their part ?
Many thanks,
Nothing has changed and interest is a relevant cost if it is extra interest incurred purely as a result of doing the special order.
Without seeing the context in which Kaplan made the statement, then certainly if this were a discounting exercise we always exclude interest. However this is for completely different reasons and discounting is not examinable in Paper PM (it is not until Paper FM and I explain the reasons in my lectures for Paper FM).
Is out of context in Kaplan as well. They just provide a short list of what to include and what to exclude. Many thanks for the quick reply and for all the support provided to all of us.
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