Sunk Cost: Difference between revisions
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{{Learning concept | {{Learning concept | ||
|Description=A sunk cost is a cost that has already been incurred and that cannot be changed by any decision made now or in the future. Because sunk costs cannot be changed by any decision, they are not differential costs. And because only differential costs are relevant in a decision, sunk costs should always be ignored | |Description=A sunk cost is a cost that has already been incurred and that cannot be changed by any decision made now or in the future. Because sunk costs cannot be changed by any decision, they are not differential costs. And because only differential costs are relevant in a decision, sunk costs should always be ignored. | ||
Sunk costs are different from fixed costs, because sunk costs are costs that will be incurred regardless of what decision is made. | |||
|Wikipedia reference=http://en.wikipedia.org/wiki/Sunk_costs | |Wikipedia reference=http://en.wikipedia.org/wiki/Sunk_costs | ||
}} | }} | ||
Latest revision as of 13:44, 2 January 2014
Description
A sunk cost is a cost that has already been incurred and that cannot be changed by any decision made now or in the future. Because sunk costs cannot be changed by any decision, they are not differential costs. And because only differential costs are relevant in a decision, sunk costs should always be ignored.
Sunk costs are different from fixed costs, because sunk costs are costs that will be incurred regardless of what decision is made.
Concept Prerequisite
Wikipedia Reference
http://en.wikipedia.org/wiki/Sunk costs
Learning Material
Covered in Topic(s)
| Cost Terms Concepts and Classification |
| Integer Programming |
| Making Capital Investment Decisions |
| Relevant Costs for Decision Making |