Finance and accounting
Sunk cost
Money already spent that cannot be recovered.
Facts checked against sources onWhat does Sunk cost mean?
A sunk cost is money already spent that you cannot get back, whatever you decide next. It should not affect a decision about the future. "We have already spent 5 million, so we must finish" is a sunk-cost mistake; the right question is whether the remaining spending is worth it.
Where does it come up in case interview prep?
Related terms
- Opportunity costThe value of the best option you give up.
- ProfitThe money left over after costs. Revenue minus cost.
- RevenueMoney earned from sales, before costs.
- CostWhat it takes to make and sell the product in a period.
- Fixed costA cost that stays the same when volume changes, within a normal range.
- Variable costA cost that rises and falls with how much you make.
- Semi-variable costA cost with a fixed part and a part that moves with volume.
- Step costA cost that is flat over a range, then jumps.
Learn it in context
See Sunk cost at work in a lesson from Sourcing, trade and supply risk, with checks as you go.
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