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Sunk Cost
(redirected from Committed Costs)

   Also found in: Wikipedia 0.03 sec.
Sunk Costs
Money that has already been spent. Sunk costs are important because a company may use, for example, an old piece of equipment to make a new product. In this case, sunk costs are positive because no further investment is required. On the other hand, a sunk cost may be negative; for example, that old piece of equipment may break down after its warranty has expired. This means that the owner will not recover the costs no matter what happens.

sunk cost
A past outlay or loss that cannot be altered by current or future actions.


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What type of job purchasing controls are in place to ensure that committed costs do not deviate from your estimated costs?
It is common to define committed costs in terms of previous contractual obligations and the capacity to provide service.
Marginal costing ignores cash flows that won't be affected by a proposal, since they are deemed irrelevant, but this can take a naive view of prepaid sunk costs or future committed costs when applied to short-term decisions, since firms must cover all their costs in the medium to long term to make a profit.
 
 
 
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