Sunk Costs

1. Sunk costs are previously incurred costs that have already been incurred and that cannot be avoided regardless of what a decision maker might decide. Sunk costs are irrelevant to a particular decision. For example, depreciation on existing equipment is a sunk cost as long as the equipment is retained. Ignoring a change in accounting principle, sunk costs can be changed only if the equipment is disposed of. See also expired costs and unexpired costs and committed costs. A past cost which cannot now be changed and therefore should not enter into current decisions for increasing or decreasing present profit levels.