XYZ plc is deciding whether or not to proceed with a special order. These are the details needed to determine the relevant cost of the order:

1-Materials P and Q will be used for the order.100 kg of P will be needed and this is in stock as it is in common use within the company. The original cost per kg was 1, but would now cost 1.20 to replace it if used on this order. Q is also in stock but only as a result of previous over purchasing. This material originally cost 500 but has no other use. In fact, the material is toxic and would be disposed of at a cost of 250 if not used on this order.

2-The contract requires 100 hours of labour at 10 per hour. Employees with the correct skills are currently employed by the company and are idle due to a downturn in the company's normal business.

3-Overhead will be absorbed by the order at a rate of 10 per labour hour, which consists of 7 for fixed overhead and 3 for variable overhead.

4-The order will require the use of a storage unit for three months. XYZ is committed to rent the unit for one year at a rental of 50 per month. The unit is not being used at present. A neighbouring business has offered to rent the unit from them for 70 per month.

5-Total fixed overheads are not expected to increase as a result of this order.

Requirements for question 4:

a) Calculate the relevant costs for this order with an explanation of how you have treated the costs.

b) Explain the different examples of categorising costs according to their relevance, clearly indicating which are relevant and which are non-relevant.