Answer:
So, the relevant cash flows are Revenue, materials and labour cost.
Explanation:
<em>A relevant cashflow is that which is future cash cost/revenue which arises as a direct consequence of a decision. For a cost or revenue to be considered a relevant cashflow it must satisfy the following conditions:</em>
1) Futuristic 2).Cash based   3)Incremental
Relevant cash flows for the contracts are set down below:
                                              $                          $
Revenue                        200,000                260,000
Materials                         (10,000)                 (10,000)
Labor                             <u> (88,000) </u>                <u>(120,000)</u>
Net cash flow                 <u>  102,000</u>                <u>130,000   </u>        
Depreciation is not a cash item, the consulting advice fee is already a sunk cost. Apportioned overhead is also not a direct cost but sunk
So, the relevant cash flows are Revenue, materials, labour