Definition of Sunk cost:
Financial outlay which has already been incurred and cannot be recovered; a cost which is unavoidable when embarking upon a particular commercial endeavour.
Money already spent and permanently lost. Sunk costs are past opportunity costs that are partially (as salvage, if any) or totally irretrievable and, therefore, should be considered irrelevant to future decision making. This term is from the oil industry where the decision to abandon or operate an oil well is made on the basis of its expected cash flows and not on how much money was spent in drilling it. Also called embedded cost, prior year cost, stranded cost, or sunk capital.
How to use Sunk cost in a sentence?
- My manager informed me that it was already a sunk cost and we would not be able to recover the funds.
- At some point you just have to admit that your project has failed and all of the money that you put into it is now a sunk cost .
- If you know that a product is destined to fail you should just give up instead of putting more money in to the sunk cost .
Meaning of Sunk cost & Sunk cost Definition