sunk costs

(redirected from Past Cost)

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 ?
Whereas in 9MFY19, exploration costs settled at PKR 12,446mn, up by 76% YoY amid i) absence of a one-timer in SPLY (recovery of past cost as the company farmed out 50% working interest and transfer of Kotri North Block), and i) higher dry wells.
"Contractors and subcontractors raised their bid prices in November to make up for past cost increases, but the cost of goods and services that they buy rose even faster," Simonson said.
"We are leaving behind the system that has in the past cost our country a heavy price in political and economic chaos," Erdogan said in an address late on Monday.
"We are leaving behind the system that has in the past cost our country a heavy price in political and economic chaos." Erdogan, 64, says the new, powerful executive presidency is vital to drive economic growth, ensure security after a failed 2016 military coup and safeguard Turkey from conflict across its southern border in Syria and Iraq.
"If these security measures were taken in the past we could have saved many precious lives," he said.He went on to say that the crucial situation in the past cost many lives as target killing cases were habitual occurrences which played a vital role in damaging peace and creating chaos and a dreadful situation in the city.
The apex bank also said that commercial banks' provisioning levels fell from the same period a year ago after local lenders booked the costs of a court ruling forcing them to repay some past cost hikes to retail borrowers.
The notice provides that the methods currently prescribed by COBRA for self-insured plans to compute the COBRA applicable premium-the "actuarial basis" method and the "past cost" method-will also apply for determining the cost of applicable coverage for self-insured plans under the excise tax.
When employers calculate former employees' COBRA premiums, for example, they typically use either an "actuarial cost method" or a "past cost method" to decide how much the COBRA premium ought to be.
While a port expansion effort pursued by the Municipality of Anchorage in years past cost hundreds of millions of dollars and culminated in a lawsuit against several of the engineering firms associated with the project, Ribuffo says the port is now moving in a new direction.
In this situation, the past cost of the machine can be recovered and the money paid for it need not be lost or "sunk." In fact money can be prevented from being wasted.
Few in Myanmar can currently afford mobile phones and SIM card fees, which in the past cost about $200, although the government is now trying to make prices more affordable.