Overview

sunk costs


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1. (sunk capital) Expenditure, usually on capital items, that once having been incurred can be included in a company's books of account as an asset, although this value cannot be recovered.

2. In management accounting, expenditure that has already been incurred and that cannot be recovered. Such costs are not relevant to any subsequent spending decisions. An example of a sunk cost is the original cost of a machine when the decision is whether or not to replace this machine. Compare relevant cost.

Subjects: Business and Management.


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