BAR Relevant Costs · Updated November 2026
Avoidable vs Unavoidable Fixed Costs: Which One Matters for Decisions?
Fixed does not automatically mean irrelevant.
Avoidable fixed cost
An avoidable fixed cost disappears if the option is chosen and is relevant.
Unavoidable fixed cost
An unavoidable fixed cost continues regardless and is usually irrelevant incrementally.
Allocation trap
Allocated common fixed cost may remain even after a segment is dropped.
Exam strategy
Ask what cash flow changes.
The takeaway
Relevant-cost decisions depend on avoidability, not simply fixed versus variable.
Related Summit resources
FAQ
Can fixed cost be relevant?
Yes.
Are allocated common costs always avoidable?
No.
What is the key question?
Does the cost change?