ACCA PM December 2026: The Relevant Costing Mistake That Costs You Easy Marks

If a material is already in your stock room, its original cost is irrelevant. Use replacement cost or resale value, depending on what the business would actually do next.

Where PM students drop marks

In PM relevant costing questions, the most common slip is the oldest one: taking the cost from the "materials in inventory" line and dropping it straight into the answer. That figure is historic. It has already been spent, so no decision you make today can change it.

The same trap appears with depreciation, apportioned fixed overheads and committed costs. All of them are in the question to tempt you. Relevant costs are future, incremental, cash-based. If it does not change as a result of the decision, it is out.

The second slip is picking one valuation rule for every material. The rule depends on the stock. Is it regularly used in the business? Then using it means buying more, so the relevant cost is replacement cost. Is it not used again, with no alternative use? Then the relevant cost is the higher of resale value and the value of using it elsewhere. Is it scarce, so it displaces other work? Then you need the contribution lost, plus any extra cost of the material.

These show up in Section B (10 marks) and as the opening part of a Section C (20 marks) decision question. The calculation is short, so a wrong rule costs you a big share of the marks available.

Worked example

A special order needs 1,000 kg of Material X. You hold 1,000 kg in stock, bought at £4/kg. It is no longer used in normal production. It could be sold for £3/kg. Replacement would cost £5/kg.

Wrong answer: 1,000 kg × £4 = £4,000. That is historic cost, and it earns nothing.

Also wrong: 1,000 kg × £5 = £5,000. The material is not regularly used, so you would never replace it.

Correct answer: 1,000 kg × £3 = £3,000. This is the opportunity cost: the cash you give up by not selling the stock.

Now change one fact: Material X is a regular production input. The correct answer becomes 1,000 kg × £5 = £5,000, because using it means buying replacements. Same material, different decision rule.

What to do

1. Label every cost before you calculate. Write "relevant", "sunk", "committed" or "non-cash" beside each line in the question. It takes a minute and protects the easiest marks on the paper.

2. Ask the stock question first. "Is this material used regularly?" decides the rule. Write the rule in your answer, because a clear explanation can earn marks even when the number goes wrong.

3. Practise the switch. Take one question and rerun it with the facts changed: regular use, no use, scarce supply. Doing this on the CBE practice platform builds speed under timed conditions.

The bottom line

Relevant costing is among the most mechanical topics in PM, which makes it among the cheapest to fix. Learn the three material rules, label your costs, and the marks are yours.

Historic cost is a distraction. Ask what changes, and only count that.