Question

Describe sunk costs. Why are sunk costs irrelevant in decision making? Give an example of a fixed cost that is not sunk, but is still irrelevant.

Answer 1

Sunk cost:	Sunk Cost are those cost which already incurred to take a decision. These are those cost which are already paid for deciding whether decision wwill be beneficial or not. These ccost are already incurred and can not reversed in any way
Sunk cost are irrelevant for decesion making because these cost are already incurred whether your decision is yes or not. They can not be reversed in any manner like research cost of a project.
Example of Fixed cost which is not Sunk:	Suppose a company has two alternatives for manufaturing a product A. But Machine B is required for the alternatives. In that case Machine B is Fixed cost which is irrelevant for decision making