Avoidable Cost:
noun
1. In economics, a cost that can be eliminated or reduced by making different choices or taking alternative actions. It refers to expenses that can be avoided if a particular decision or course of action is not pursued.
2. Also known as escapable cost or discretionary cost, it represents the expenses that can be prevented or minimized by opting for a different approach or decision. Avoidable costs are typically associated with variable costs, as they can be adjusted or eliminated based on the choices made by individuals or organisations.
3. Avoidable costs are crucial in decision-making processes, as they help determine the financial impact of different alternatives. By identifying and analyzing avoidable costs, individuals or businesses can assess the potential savings or benefits of choosing one option over another.
Example: A manufacturing company can reduce its avoidable costs by outsourcing a particular production process to a cheaper supplier, rather than producing it in-house. By doing so, the company can save on labor, raw material, and overhead costs, resulting in overall cost reduction.
Avoidable costs are expenses that can be eliminated or avoided if a particular decision or action is not taken. These costs are relevant in decision-making processes as they help determine the financial impact of different options. Avoidable costs are contrasted with unavoidable costs, which are expenses that will be incurred regardless of the decision made.
In legal contexts, avoidable costs may be considered in various situations. For example, in contract disputes, parties may argue that certain costs incurred by one party could have been avoided if the other party had fulfiled its obligations. This can be relevant in determining the amount of damages to be awarded.
Avoidable costs can also be relevant in tort cases, where the concept of mitigation of damages comes into play. If a plaintiff fails to take reasonable steps to minimize their losses after an injury or harm caused by the defendant, the defendant may argue that the plaintiff’s avoidable costs should be deducted from the damages awarded.
Overall, avoidable costs are an important consideration in legal matters as they help assess the financial impact of decisions and actions, and can influence the determination of damages or liability.
This site contains general legal information but does not constitute professional legal advice for your particular situation. Persuing this glossary does not create an attorney-client or legal adviser relationship. If you have specific questions, please consult a qualified attorney licensed in your jurisdiction.
This glossary post was last updated: 29th March 2024.
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