Which of the following best defines relevant costs?

Relevant costs are defined as costs that will be directly affected by a specific decision. This means that when making a decision, these costs will change as a result of the alternative chosen. Understanding relevant costs is crucial for effective decision-making, as they represent the future costs that will differ depending on the outcome of a choice, such as whether to accept a special order, discontinue a product, or make versus buy a component.

In contrast, fixed and unchangeable costs are generally not relevant since they remain constant regardless of the decision at hand. Similarly, costs that have no impact on decision-making, often referred to as sunk costs, are historical and should not influence current or future decisions. Past costs, while they may influence the context of decision-making, do not provide actionable insights for future choices since they cannot be altered. Thus, the correct definition of relevant costs is centered around their potential to change based on the decisions made.