Relevant costs refers to those cost which will be affected by a managerial decision. While Irrelevant costs refers to the cost that will not be affected by the managerial decisions. Examples of irrelevant costs are sunk costs, committed costs, or overheads as these cannot be avoided.
The relevant cost in Beauty salon:
1. Cost of Raw Material
2. Salaries of employees
3. Variable cost
These costs are affected by the decision of the management. For e.g- The management decided to adopt new technology which reduces the per unt cost of the product. Thus, variable cost of the product reduces.
The irrelevant cost in Beauty salon:
1. Depreciation on fixed assets.
2. Amortization
3. sunk cost of Marketing promotions and advertising.
These costs are not affected by the decisions taken by the management. For e.g- The management decided to adopt a new technology for the cost reduction, this decision will not affect the depreciation charged on the fixed assets as depreciation is a non cash expense and it will incur no matter what decision management takes.