Machinery Cost is relevant Cost or not

Machinery Cost is relevant Cost or not

Machinery cost is normally deemed to be a sunk cost but a careful consideration is required because when machinery is bought for project and will be utilized in that project then it becomes incremental cost and therefore relevant cost.

Machinery usage charges also come under the definition of the incremental cost. Similarly any reduction is sale value of the machine is also a relevant cost but it must not be confused with the deprecation of machinery which is an irrelevant cost because of non cash item.

The following table explains the relevant and irrelevant cost related to machinery.

Cost type	Relevant Cost	Not Relevant Cost
Machinery already purchased		Not relevant
Depreciation		Not Relevant
Hire charges	Relevant
Specifically purchase project	Relevant
Decline resale value	Relevant