What is an Unavoidable Cost?

An unavoidable cost is an expenditure for which there is a firm spending commitment in the short term. Because of the commitment, it is not possible to sidestep the cost until the commitment period has ended. This type of cost does not factor into short-term operational decisions, since it will not vary as a result of those decisions.

Example of an Unavoidable Cost

An example of an unavoidable cost is rent payments under a long-term lease deal. Another example of an unavoidable cost is a long-term purchase commitment, such as a 20-year deal by a utility to purchase coal from a mining company.