Sunk cost vs opportunity cost
[DOC File]Chapter 2, (Garrison Text) - Oakland University
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Opportunity cost is not usually entered in the accounting records of an organization, but it is a cost that must be explicitly considered in every decision a manager makes. Sunk cost-- is a cost that has already been incurred and that cannot be changed by any decision made now or in the future. These costs should be ignored when making a decision.
[DOC File]CHP 6: RELEVANT INFORMATION & DECISION MAKING
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Cost Terminology (pg 206-209): -Sunk Cost: A cost that has been incurred and will exist regardless of any alternative chosen (i.e. always irrelevant). -Opportunity Cost: Not a recorded cost, but the single highest “foregone benefit” lost by taking one action over another.
[DOC File]March 6, March 18, 2002
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e. Sunk vs. Variable Costs. A final distinction (and one we’ve made before). Fixed costs may be divided into two components: Sunk costs and recoverable costs. Sunk costs are costs forever lost after they are paid. This is an important distinction, for the opportunity costs of recoverable assets and sunk cost assets is remarkably different.
[DOC File]Chapter 1
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The lost rental revenue of $600 is an opportunity cost of accepting the reservation for the wedding. SUNK COST. 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. Sunk costs are irrelevant and should be ignored in decisions.
[DOC File]Chapter 8 - Making Capital Investment Decisions
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2. Ignore sunk costs. sunk cost => cost already incurred (or committed) Key: irrelevant since not affected by accept/reject decision. Ex. Cost of music classes taken before decided to study finance. 3. Include opportunity costs. Opportunity cost - cost of foregone opportunity. Keys: 1. Should be included as cash outflow even if no additional ...
[DOC File]Costs: Fixed, Variable and Sunk
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Sunk Cost. Sunk costs are contracts and decisions that are already vouched and cannot be recovered anymore. Compare to opportunity costs where one has a decision of giving up something in order to attain another thing, one has to live with sunk cost because they are expenses that are permanent. For example, if John noticed that it is not worth ...
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