ACCA PM Relevant Costing 2026: The Machine Cost Mistake Losing You Easy Marks

The trap: one machine, four numbers, one right answer

A machine in a relevant costing question often comes with four price tags. Only one of them is relevant. Pick any of the other three and you've thrown the marks away before you've written a word.

This is the single most common way candidates lose easy marks in PM Section C decision-making. The numbers are all sitting there in the scenario — historic cost, resale value, replacement cost, income foregone — and they're designed to test whether you actually understand relevant costing or just reach for the biggest, most recent, or most obvious figure.

What relevant cost actually means

A relevant cost is a future, incremental cash flow that changes because of the decision. That's it. If a cost has already been spent, it's sunk — it cannot be relevant, no matter how large. If a cost would happen anyway, it's not incremental. For an asset you already own, the relevant cost is almost never what you paid for it. It's what you give up by using it here instead of somewhere else — the opportunity cost.

The tool for this is deprival value: the lower of replacement cost and the higher of (resale value, value in use). Learn that ladder. Most existing-asset questions are testing exactly this.

Worked example: the MJ25 machine question

In the March/June 2025 exam (Hurstmid Co), candidates were given a machine to value for a new order. The scenario said: it was purchased for $80,000 two years ago, now has a resale value of $90,000, a replacement cost of $120,000, and if used elsewhere could generate net income of $110,000. What's the relevant cost?

Wrong answer: $80,000. "That's what the machine cost." It's sunk. The money left the building two years ago and no decision today can change it. Ignore it completely.

Wrong answer: $120,000. "It's the replacement cost, so that's what it's worth." Only relevant if the company would actually have to replace it — and here it wouldn't, because keeping the existing machine in use ($110,000) is cheaper than buying new.

Correct answer: $110,000. The machine is already earning $110,000 elsewhere. To use it for this order, Hurstmid either loses that $110,000 of income or buys a replacement for $120,000. The lower of those is $110,000 — so that's what using the machine truly costs. The $90,000 resale is ignored because the company is better off using the machine than selling it.

The mistake that costs even the strong candidates

The examiner has flagged this repeatedly: marks are lost not on the included costs, but on the excluded ones. Candidates explain why they put a number in — but say nothing about why they left the sunk cost or the resale value out. The requirement to "explain clearly why costs have been included or excluded" means both halves. A relevant cost statement with no justification for the exclusions is a half-finished answer.

What to do in the exam

1. For any existing asset, cross out the purchase price first. Physically ignore the historic cost. Then ask one question: what do we give up by using this here? That's your number.

2. Run the deprival value ladder. Lower of replacement cost and the higher of (resale value, value in use). Four numbers go in, one comes out. Apply it the same way every time and you can't be tricked by the ordering in the scenario.

3. Justify every exclusion, not just the inclusions. Write one line per ignored figure: "$80,000 is sunk; $90,000 resale is below the $110,000 value in use." Those sentences are worth real marks and most candidates skip them.

Bottom line

PM pass rates hover around the 40% mark, and decision-making is one of the most heavily tested Section C areas. Relevant costing isn't hard — it's just unforgiving. The examiner puts four numbers in front of you and only rewards the one who knows which three to throw away. Cross out the sunk cost, run the ladder, explain your exclusions. Do that and the marks are yours.