RELEVANT COSTING

Relevant Costing
This means if you are taking a decision, cause of that specific decision if you have to incur another cost its call a relevant cost.

Direct Materials

Not In Stock Purchase Price

In Stock

In Regular Use Replacement Cost

Not In Regular Use (Higher of)

TOX IC

SCRAP

ALTERNATIVE USE

Direct Labour

Have spare Capacity NIL- unless there is O/T

Dont have Spare Capacity LOWER OF

Hire Extra employees

Cost Of Hiring

Sacrifice current production

Contribution from existing production

Over-Heads

Variable Relevant

Fixed Relevant only if it specific to the job

Non Current Assets

To be replaced
Replacement Cost

Not to be replaced
HIGHER OF

Sales Proceeds

Cash Flow from Using of Asset

Selling Price ie RESIDUAL VALUE