Fixed costs that may be avoided in the future are referred to as
A)relevant costs.
B)opportunity costs.
C)replacement costs.
D)sunk costs.

Question

Quizplus · Accepted Answer

Relevant costs are costs that will change based on a specific decision and can be used to help make that decision. Fixed costs that may be avoided in the future are relevant costs because they will change if a certain decision is made, such as shutting down a department or discontinuing a product line. Opportunity costs refer to potential benefits that are forgone by choosing a certain alternative, replacement costs refer to the cost of replacing an asset that has reached the end of its useful life, and sunk costs are costs that have already been incurred and cannot be changed.

Fixed Costs That May Be Avoided in the Future Are