how does this sound : The fourth classification is Relevance. This cost classification is crucial for making informed decisions as it focuses on identifying and considering only those costs and revenues that will change as a result of a specific decision. Opportunity costs and sunk costs are both important concepts with this classification. Let me give you an example, In my marketing class I am working on a stimulating project, and I have to produce different bikes. If I choose to use my factory space to produce speed bikes rather the mountain bike , the potential cost if the potential profit that could have been generated from the mountain bike. Sunk costs are costs that have already happened and will not change regardless of the decision that I make. For example, if I used money on advertising and development of the bike , those costs are sunk costs and should not influence whether or not I should continue producing other or new bikes. As a manager I can make more effective decisions and maximize the organizational value of my business when focusing on relevant costs and excluding sunk costs