ACCA PM 2026: Relevant Costing — Why That Sunk Cost Is Killing Your Marks

If a cost has already been spent, it is irrelevant — full stop. Include one sunk cost in a PM decision-making answer and you don't just drop that mark, you tell the examiner you've missed the whole point of the question.

What "relevant" actually means

A relevant cost is a future, incremental cash flow that changes as a direct result of the decision. Three words, three tests. Future: already committed or spent money is out. Incremental: only the change counts, never the total. Cash flow: depreciation and apportioned overheads are non-cash and stay out. The PM examiner reports repeatedly flag candidates who fail these tests — wrongly including sunk costs and irrelevant fixed overheads in scenarios on material procurement and special orders.

The sunk cost trap

Money already spent — the $20,000 of market research, the material bought last year, the machine you already own — is gone whatever you decide. It cannot be relevant. Students see a big number in the scenario and feel it must matter. It doesn't. The examiner drops sunk costs into the question deliberately, to separate the candidates who are thinking from the ones who are just adding up.

Materials and labour: know the two rules for each

Materials. If the material is in regular use, the relevant cost is the replacement cost — using it now means buying more. If it's not in regular use and you already hold it, the relevant cost is the higher of its scrap value or the saving from an alternative use. The original purchase price is never relevant.

Labour. If there's spare capacity, extra work costs nothing incremental — you're already paying the wages. If labour is at full capacity, the relevant cost is the wage plus the contribution lost from pulling staff off other work. That opportunity cost is where most marks are won and lost.

Wrong answer vs right answer

Scenario: a contract needs 100kg of a material the company bought two years ago at $50/kg. It's in regular use; the current price is $70/kg. It also needs 40 hours of skilled labour paid $15/hour, but the workforce is at full capacity and each hour diverted loses $25 of contribution elsewhere.

Wrong: material 100 × $50 = $5,000; labour 40 × $15 = $600; relevant cost $5,600.

Right: material 100 × $70 replacement = $7,000; labour 40 × ($15 + $25) = $1,600; relevant cost $8,600. The $50 purchase price is sunk, and the labour must carry the lost contribution.

What to do in the exam

1. Interrogate every figure with three words: future, incremental, cash. If it fails one test it's irrelevant — write "sunk / not relevant" beside it so the marker sees you knew.

2. For every material and labour line, state your assumption. "Assumed in regular use, so replacement cost" earns the method mark even when the scenario is ambiguous.

3. Always ask whether labour or a machine is at full capacity. If it is, there's an opportunity cost hiding in the scenario — and it's usually worth several marks.

Bottom line

PM's pass rate sits around 40%, and decision-making questions are where sharp candidates pull ahead. The maths is trivial once the thinking is right — relevant costing rewards judgement, not arithmetic.

Before you put any number in, ask one thing: does this change because of the decision? If not, leave it out.