Which best describes relevant costs?

Relevant costs are those costs that will change as a direct result of a specific decision and can be avoided or incurred depending on the choice made. These costs are crucial for decision-making processes since they are tied directly to the benefits or consequences of that decision. In this context, if a decision leads to the avoidance or incurrence of a particular cost, then that cost is considered relevant.

When determining relevant costs, it is vital to focus on future costs that will be influenced by the decision at hand. Therefore, the definition aligns perfectly with the second choice, which states that relevant costs are those that could be avoided if a certain decision is not made, indicating their direct impact on the decision-making process.

The other options do not capture the essence of relevant costs. Costs that affect financial statements but not decisions do not provide the necessary insight for decision-making. Past costs that have already been incurred are termed sunk costs and do not affect future decisions, as they cannot be changed. Lastly, costs that arise from historical data analysis do not represent actionable or current costs relevant to decision-making today; they may offer insights but do not directly apply to the choice at hand.