Relevant costs
In one sentenceFuture costs that change depending on the decision taken; sunk costs and costs that do not differ between alternatives are excluded.
Simply put
A relevant cost has two conditions: it is in the future, and it differs between alternatives. What was paid in the past does not count.
Opportunity cost is included: if you could sell a material you already hold, using it costs you its selling price, not its purchase price.
Worked example
A metalwork workshop was offered a job worth 6,000 SAR; it owns steel bought earlier for 5,000 SAR that could be sold today for 2,000 SAR, and the job needs extra wages of 3,000 SAR.
Purchase price of the steel (sunk, excluded)5,000 SAR
Value of selling the steel today (opportunity cost)2,000 SAR
Extra wages3,000 SAR
Relevant cost2,000 + 3,000 = 5,000 SAR
Effect of accepting the job = 6,000 − 5,0001,000 SAR additional profit
Don't confuse it with
Sunk costSunk costs are always irrelevant, because no decision today changes them.