ACCA PM Relevant Costing: 4 Mistakes Losing You Easy Section C Marks (June 2026)

Relevant costing is the most learnable topic in ACCA PM — and students still hand back marks by costing things that shouldn't be in the answer at all. The rule is brutally simple: a relevant cost is a future, incremental cash flow caused by the decision. Anything else is noise.

This is a Section C banker. When relevant costing comes up as a 20-mark decision-making question, the marks are there for the taking. But the PM examiner keeps reporting the same thing: candidates default to the figures printed in the question instead of asking whether each one is actually a future cash flow caused by the decision. Here are the four that cost the most.

1. You're including sunk costs

Money already spent is irrelevant — full stop. Market research already commissioned, a feasibility study already paid for, design work already done: none of it changes with the decision, so none of it belongs in your relevant cost. It feels wrong to ignore a real cost the business incurred, but PM is testing the decision in front of you, not the history behind it.

2. You're using historical cost for materials

The cost of materials in inventory is not what you paid for them. If the material is used regularly, its relevant cost is the replacement cost, because using it now means buying more. If it's no longer used and can't be replaced, the relevant cost is what you give up by consuming it — its scrap value or its net realisable value if it could be sold. The original purchase price almost never matters.

3. You're ignoring opportunity cost

The most missed figure in the whole topic. If a decision uses a scarce resource — skilled labour at full capacity, a machine already running flat out — the relevant cost includes the contribution you forgo elsewhere. Conversely, if there's spare capacity, idle labour that's paid anyway has a relevant cost of zero. Candidates routinely charge the full wage rate when the staff would have been sitting idle.

4. You're charging fixed overheads and depreciation

Apportioned fixed overheads and depreciation are not incremental cash flows. Unless the decision genuinely changes total fixed costs, leave them out. Depreciation never goes in a relevant cost answer — it's an accounting allocation, not a cash flow caused by the decision.

Worked example: material in inventory

A contract needs 500kg of Material X. You hold 500kg, bought last year at $4/kg. Material X is used regularly across production, and its current purchase price is $6/kg.

Wrong: 500kg × $4 = $2,000, using the historical cost from inventory records.

Right: 500kg × $6 = $3,000. Because the material is used regularly, taking it for the contract means you must buy more to replace it — so the relevant cost is the replacement cost. The $4 you paid last year is sunk.

What to do before June

Run the three-question test on every line. Is it in the future? Is it incremental? Is it a cash flow? If any answer is no, it's irrelevant and gets a clear "$nil — sunk/non-cash" note. State why — examiners reward the reasoning, not just the number.

Drill the materials and labour rules cold. Regularly used material = replacement cost. Non-replaced material = scrap or NRV. Spare-capacity labour = nil. Full-capacity labour = cost plus contribution forgone. These four lines decide the question.

Lay out a relevant cost statement, not a paragraph. One column per option, every cost on its own row with a brief reason. It's faster to mark, harder to make slips in, and shows the examiner exactly how you decided.

The bottom line

PM hit a 45% pass rate in March 2026 — its highest in over a decade — but more than half the room still fails, and they lose Section C on exactly this kind of question. Relevant costing isn't hard. It's just unforgiving if you cost the past instead of the decision. Future, incremental, cash — anything else stays out.