Relevant cost
Relevant cost, also known as differential cost, is an accounting term that is used to refer to costs that pertain to a particular decision. This means that those costs could be avoided depending on whether the decision is taken. Relevant costs will differ between the alternative options being considered.
By identifying the relevant costs that relate to a particular decision, cost information that is common to all options, and so not relevant to the decision can be removed; these are referred to as irrelevant costs. Time and effort can be saved by distinguishing between relevant and irrelevant costs when analysing options.
Relevant costs are typically considered in two categories:
- Future cost: The cost that will be incurred in the future as a result of the decision (If this future cost does not change based on the decision then it is an irrelevant cost).
- Opportunity cost: The amount that will be lost in terms of missed opportunities as a result of the decision.
[edit] Related articles on Designing Buildings Wiki
Featured articles and news
Local leaders gain new powers to support local high streets
High Street Rental Auctions to be introduced from December.
Infrastructure sector posts second gain for October
With a boost for housebuilder and commercial developer contract awards.
Sustainable construction design teams survey
Shaping the Future of Sustainable Design: Your Voice Matters.
COP29; impacts of construction and updates
Amid criticism, open letters and calls for reform.
The properties of conservation rooflights
Things to consider when choosing the right product.
Adapting to meet changing needs.
London Build: A festival of construction
Co-located with the London Build Fire & Security Expo.
Tasked with locating groups of 10,000 homes with opportunity.
Delivering radical reform in the UK energy market
What are the benefits, barriers and underlying principles.
Information Management Initiative IMI
Building sector-transforming capabilities in emerging technologies.
Recent study of UK households reveals chilling home truths
Poor insulation, EPC knowledge and lack of understanding as to what retrofit might offer.
Embodied Carbon in the Built Environment
Overview, regulations, detail calculations and much more.
Why the construction sector must embrace workplace mental health support
Let’s talk; more importantly now, than ever.
Ensuring the trustworthiness of AI systems
A key growth area, including impacts for construction.
Foundations for the Future: A new model for social housing
To create a social housing pipeline, that reduces the need for continuous government funding.
Mutual Investment Models or MIMs
PPP or PFI, enhanced for public interest by the Welsh Government.
Key points and relevance to construction of meeting, due to reconvene.