sunk costs

(redirected from Past Costs)

Sunk costs

Costs that have been incurred and cannot be reversed.

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 costs

any expenditure on durable and specific FACTOR INPUTS, such as plant and machinery, that cannot be used for other purposes or easily be resold. Such sunk costs have no affect on MARGINAL COSTS and do not influence short-term output decisions.

The presence of sunk costs through investment in TRANSACTION-specific assets can affect the relative bargaining power of parties to a CONTRACT. See ASSET SPECIFICITY. See also OPPORTUNITY COST, BARRIERS TO EXIT.

References in periodicals archive ?
The companies will also collectively reimburse EPA more than $600,000 for past costs incurred.
As part of the deal, AziPac will pay a working interest share of the approved past costs and carry part of Mitra's costs of acquisition and processing of a 3D seismic survey, scheduled to be acquired in the second half of 2014.
Outlining the terms of the arrangement, Eco Atlantic will transfer 25% working interest in the Cooper Block to allow Tullow in return for a carry of Eco Atlantic's share of the costs to execute and process the seismic programme, and the reimbursement of 25% of Eco Atlantic's past costs of approximately US$1 million.
We object to this terminology, since those costs could simply be named as past costs.
the remaining portion of the $85 million recoverable past costs supported by the 2012 seismic program, once China National Petroleum Corporation (CNPC) completes its annual cost recovery audit for 2012 expenditures; and,
In the past costs for many care services have been higher in Northumberland than other local authorities.
represent huge past costs and potential future costs to the taxpayer of implementing EU schemes in the UK," Mr Morse said.
But designing effective AFAs requires a detailed upfront review of past costs and projected needs.
In the past costs of key raw materials like TiO2 feedstock, as well as secondary ones like petroleum, coke, caustic, sulfuric acid and phosphoric acid, would increase by factors of percentages," said Verdejo.
He said Gulf's investors--the governments of Bahrain and Oman--have approved a capital injection to cover past costs, fund the restructuring and invest in "future operational improvements.
Say hello - you all work in the same place so a quick hello as you walk past costs nothing