ECONOMICS

Detailed explanation-1: -An example of sunk costs in accounting is the book value of existing assets such as fixed assets (e.g., machinery, equipment), inventory, investments, etc. Depreciation, amortization, and impairments also represent sunk costs.

Detailed explanation-2: -The book value of an entity’s fixed assets is a component of an irrelevant cost. It is a sunk cost, which means that the expenditure was incurred previously and will have no impact on future business decisions, regardless of the decision or outcome of its replacement.

Detailed explanation-3: -A sunk cost, sometimes called a retrospective cost, refers to an investment already incurred that can’t be recovered. Examples of sunk costs in business include marketing, research, new software installation or equipment, salaries and benefits, or facilities expenses.

Detailed explanation-4: -A sunk cost refers to money that has already been spent and cannot be recovered. A manufacturing firm, for example, may have a number of sunk costs, such as the cost of machinery, equipment, and the lease expense on the factory.

Detailed explanation-5: -Facilities and Overhead: Similarly, money spent on rent, electric and water bills, and maintenance and other expenses for your physical space are generally sunk costs, as soon as they are paid out.