What is a 'relevant cost' in decision-making?

A relevant cost in decision-making is defined as a cost that directly impacts the decision at hand and varies depending on the chosen option. It is crucial for effective decision-making because it helps identify which costs should be considered when evaluating different alternatives. Relevant costs typically include variable costs that will be incurred or avoided based on the specific choice made and exclude any fixed or sunk costs that will not change regardless of the decision.

The correctness of this definition lies in its focus on the future implications of the decision, as relevant costs are those that will affect the financial outcomes moving forward. By concentrating on these costs, decision-makers can make informed choices that align with the financial goals of their organization. This is why option C is the correct answer; it accurately captures the essence of relevant costs in the decision-making process.