Question: We often discuss sunk costs in management accounting courses when examining relevant revenues and costs for incremental decision-making purposes. In theory, sunk costs should be
We often discuss sunk costs in management accounting courses when examining relevant revenues and costs for incremental decision-making purposes. In theory, sunk costs should be irrelevant for current decision-making as those costs are in the past and typically cannot be changed. Can you think of an example of incremental analysis where we might have a sunk cost? Should that sunk cost influence the decision or analysis in any way? Why or why not?
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