Question

Explain the Escapable cost.

Answer 1

Escapable cost refers to the cost that a business can avoid or eliminate if a particular activity, operation, or decision is discontinued. These costs are not fixed and can be saved if the associated function is stopped.

Examples:

• Wages of employees hired for a specific project
• Rent for a factory that is closed down
• Raw material costs for a discontinued product
• Utility bills for a shut-down office or unit

Escapable costs are important in decision-making, especially when evaluating whether to continue, modify, or shut down a business activity.