Avoidable Cost

DEFINITION of 'Avoidable Cost'

An expense that will not be incurred if a particular activity is not performed. Avoidable cost refers to variable costs that can be avoided, unlike most fixed costs, which are typically unavoidable.While avoidable costs are often viewed as negative costs, they may be necessary to achieve certain goals or thresholds.

BREAKING DOWN 'Avoidable Cost'

Avoidable costs are expenses that can be avoided if a decision is made to alter the course of a project or business. For example, a manufacturer with many product lines can drop one of the lines, thereby eliminating associated expenses such as labor and materials. Corporations looking for methods to reduce or eliminate expenses often analyze avoidable costs associated with underperforming or non-profitable product lines.

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