can any one help me in this basic concept of relevant costin

Dear Sivaram

Here I am giving in brief the concepts I have learnt from our teacher-

Relevant costing is done for acceptance of Offer/Contracts/Special ordered job.

Offer/Contracts/Special ordered jobs are always presumed to be in addition to regular activities or work of the company.

The funda is that the material which is in regular use of the company should never be utilized for any offer or addtional contract.  If the company needs material for the offer it should purchase it from the market and it should not be withdrawn from the stock.  Material which is regularly used by the company should also never be sold.  In case if due to offer, excessive material is to be purchased than the balance should be transferred to the stock.

In query it is given that Material A is regularly used by the company, so you can't say that the material lying in stock is sunk.  A regularly used material can't be treated as sunk material.  So as per this principle you will have to buy entire material required for the contract from the market and you can't use material lying in stock.

The reason for not using stock material is that the company shuld not risk its regular activities for the sake of additional offer or contract.

Thanks Mr Mohit Mahajan so kind in replying to my query.Thank you so much