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sir i watched your video on this topic and i have some confusion
as you said relevant cost are those which would increase or decrease if we undertake that project.
for ex their is a shortage of labour. And all labour are fully employed in the company. the project require 800lb hr. labour hr rate is 9.5 . lost contribution is 8000.
then sir in this question how labour wages can be relevant.? i mean if they don’t undertake this project they will still be working somewhere in the company. if they undertake that project they will work in this project. isn’t it more like committed cost.By doing the project you are taking them away from what they are currently doing…. Because they are fully employed and there is a shortage of labour.
So to do the project they would need to move across, which means they can’t work on whatever is keeping them busy. So they would loose the contribution that they currently generate working as they do.
You consider what would happen-
Relevant costs of doing the project.It is not a committed cost they are costs that would be incurred in the future but they cannot be avoided because the company has already committed to them through another decision which has been made.
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