A sunk cost is a cost that has already been incurred and thus cannot be recovered. A sunk cost differs from future costs that a business may face, recovered. A sunk cost differs from future costs that a business may face, such as decisions about inventory purchase costs or product pricing. Sunk costs are excluded from future business decisions, because the cost will be the same regardless of the outcome of a decision. When making business decisions, organizations consider relevant costs, which include the future cost and revenue of one choice compared with another. To make an informed decision, a business only considers the costs and revenue that will change as a result of the decision. Do you think this is how companies act in the real world?
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