Equipment owned by a company has a net book value of £1800 and has been idle for some months. It could not be used on a six months contract which is being considered.

If not used on this contract, the equipment would be sold now for a net amount of £2000. After use on the contract, the equipment would have no saleable value and would be dismantled. The cost of dismantling and disposing of it would be £800.

What is the total relevant cost of the equipment to the contract?

(a) £1200

(b) £1800

(c) £2000

(d) £2800 (2 marks)
ACCA - Financial Information for Management