Chapter 25, Problem 12DQ

To determine

Introduction:

Sunk Costs: The cost or expenses incurred and spent already by the business refers to sunk costs. Sunk costs are irrecoverable in nature by whatever changes in decisions by the management as they are the expenses incurred due to the decisions made in the past. Sunk costs cannot be avoided as already incurred.Depreciation, administrative expenses and allocations are examples of sunk costs.

To state:

The reason why sunk costs are irrelevant for the present condition decision making by the management.