A sunk cost is a cost that has already incurred or paid but there is no way it can be recovered. A common example of sunk cost from daily life is that you buy a cinema ticket for $25 for the first show but at the same date you have to go somewhere else and you are no longer able to attend the show. This $25 is a sunk cost.
In businesses, before launching a new product or starting an expansion project, marketers research for the potential outcomes of the initiatives. For example, the marketing team spent $15000 on the research about the new product and it turns out that the product will not be profitable. In this case, the $15,000 is a sunk cost. In accounting, we normally expense out all the sunk cost immediately and it is not capitalized.
Explain why sunk costs should not be included in a capital budgeting
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Explain why sunk costs should not be included in a capital budgeting
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Why might a manager exhibit a behavioral tendency to inappropriately consider sunk
It’s been 2 months since you took a position as an assistant
Ace Cleaning Service is considering expanding into one or more new market
