Which statement about Cost Avoidance and Cost Savings is true?

Which statement about Cost Avoidance and Cost Savings is true?

• A. Cost Avoidance Refers to Reducing Future Requirements; Cost Savings Refers to Reducing an Already Approved Program
• B. They Are the Same Concept
• C. Cost Avoidance Reduces Current Expenses; Cost Savings Reduces Potential Future Requirements
• D. Cost Avoidance Reduces a Current Program; Cost Savings Reduces a Future Need

Answer: (A)

The key idea is that cost avoidance and cost savings address spending in two different ways and at different times. Cost avoidance is about preventing costs from arising in the future by changing plans or requirements so you won’t need to spend later. It doesn’t reduce money you’re already obligated to spend on an existing program; it lowers the forecasted future need. Cost savings, on the other hand, is a real reduction in what you actually spend on an already approved program or activity—it lowers the cost of something that is in place or planned, not merely preventing future needs. So the statement that best captures this is that cost avoidance refers to reducing future requirements, while cost savings refers to reducing costs for an already approved program. It’s not the same concept, and the other options mix up timing and what gets reduced.

The key idea is that cost avoidance and cost savings address spending in two different ways and at different times. Cost avoidance is about preventing costs from arising in the future by changing plans or requirements so you won’t need to spend later. It doesn’t reduce money you’re already obligated to spend on an existing program; it lowers the forecasted future need. Cost savings, on the other hand, is a real reduction in what you actually spend on an already approved program or activity—it lowers the cost of something that is in place or planned, not merely preventing future needs.

So the statement that best captures this is that cost avoidance refers to reducing future requirements, while cost savings refers to reducing costs for an already approved program. It’s not the same concept, and the other options mix up timing and what gets reduced.