Avoidable cost
Avoidable cost is a cost that will be eliminated if a specific course of action is chosen, such as closing a product line. Only avoidable costs are relevant to a decision; unavoidable costs, whether sunk or committed, should be ignored.
FrameworkRelevant costing
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When a business considers closing a warehouse, only the costs that will genuinely disappear are relevant: rent, staff wages and utilities for that site. Sunk costs, contracts that cannot be exited and head-office overhead that would simply be redistributed elsewhere are unavoidable and must be excluded, or the analysis overstates the savings.
Where it fits
SubjectCost AccountingCoreTopicRelevant Costs & Decision-MakingCore