Sunk costs

Project appraisal.

Sunk costs are expenditure which has already taken place, or to which an organisation is already irrevocably committed.

A sunk cost is one which cannot be recovered or reversed.

Sunk costs are irrelevant to project appraisal: "Sunk costs don't count."

A common mistake in project appraisal and analysis is the inclusion - in error - of sunk costs in the analysis.

See also

• Contribution analysis
• Fixed cost
• Incremental cash flows
• Opportunity cost
• Project appraisal
• Sunk cost fallacy