What are sunk

costs?

Explain whether they are relevant costs.

A.

Sunk costs are costs that are based on a previous commitment and cannot be recovered. Therefore, they are not relevant costs for the decision.

B.

Sunk costs are always fixed costs making them irrelevant.

C.

Sunk costs are relevant since it is a cost that does not vary in the short run with a specified activity.

D.

Sunk costs are always relevant because they can be influenced by whatever alternative the manager chooses.