Fundamentals of Cost Accounting 3rd Edition by William N. Lanen, Shannon W. Anderson, Michael Maher

Exercise 2

What is the difference between a sunk cost and a differential cost?

Step 1 of 3

Sunk costs:

A cost that had already been incurred by the organization and irrecoverable in future is called a sunk cost. Sunk cost is different from the future cost that may be incurred by the business, for example decision related to the price of product or purchase of inventory.