Costs which can be eliminated in whole or in part if a particular business segment is discontinued are called:

Costs which can be eliminated in whole or in part if a particular business segment is discontinued are called:

a) sunk costs.

b) opportunity costs.

c) avoidable costs.

d) irrelevant costs.

Answer: c) avoidable costs.

Finally, variable costs are those costs that can be directly identified with a particular business segment, product line, or operation and would no longer exist if that segment, line, or operation is out of the business. Such costs are present and directly linked to the particular segment or activity, and would be eliminated if that segment or activity was not present. Some examples of avoidable costs include direct wages, direct materials, and some of the segment spending on special/extra overheads. The confusion of necessary costs with avoidable costs can hinder organizations from implementing efficient business strategies like launching or abandoning a product line or business segment due to serious repercussions on cost savings and profits.