Which financial concept considers only costs that can change based on decisions made?

The concept that considers only costs that can change based on decisions made is relevant costs. Relevant costs are future costs that will be directly affected by a specific business decision. This means that they are costs that can be avoided or incurred depending on the choice made at that point in time. For example, if a company is deciding whether to discontinue a product line, only the costs that would change as a result of this decision—like direct materials, labor associated with the product, and any variable overhead costs—are relevant.

In contrast, fixed costs remain constant regardless of the decision made and are therefore not considered relevant in this context. Sunk costs, which are costs that have already been incurred and cannot be recovered, are also not relevant to future decisions. Irrelevant costs refer to costs that will not change regardless of the decision and thus do not impact the decision-making process. Therefore, relevant costs are crucial for effective decision-making as they provide the necessary information on costs that will change depending on the decision taken.