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Concept of relevancy of cost with three examples

Relevant costs are those costs which are pertinent to a decision. In other words, these are the costs which are influenced by a decision. Those costs which are not affected by the decision are not relevant costs.

Examples of relevant costs are:
(1) All variable costs are relevant costs.
(2) Fixed Costs which vary with the decision are relevant costs.
(3) Incremental costs are relevant costs.

Examples of non-relevant costs:
(1) All fixed costs are generally non-relevant.
(2) Variable costs which do not vary with the decision are not relevant costs.
(3) Book value of the asset is not relevant.
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