Comments on: Definition of sunk cost http://tynerblain.com/blog/2006/03/24/definition-of-sunk-cost/ Software product success. Sun, 12 Feb 2012 19:10:25 +0000 hourly 1 http://wordpress.org/?v=3.0.4 By: Scott Sehlhorst http://tynerblain.com/blog/2006/03/24/definition-of-sunk-cost/comment-page-1/#comment-860698 Scott Sehlhorst Thu, 02 Feb 2012 12:01:54 +0000 http://tynerblain.com/blog/2006/03/24/definition-of-sunk-cost/#comment-860698 Thanks Girum, and welcome to Tyner Blain! To answer your questions, <ol> <li>Sunk cost should not be included in the analysis of the project because none of the choices you are considering making can change if that money has already been spent - do the project or don't do it, you've already spent the money.</li> <li>"Pre-operating cost" can include both investments you've already made (sunk cost) and investments you haven't made yet, that have to be made before you start operations. Any money you haven't spent yet should still be considered.</li> <li>Well, my point is that it <i>shouldn't</i> be included, but it often is. It is a mistake to do it, even though many people still do.</li> </ol> Thanks Girum, and welcome to Tyner Blain!

To answer your questions,

  1. Sunk cost should not be included in the analysis of the project because none of the choices you are considering making can change if that money has already been spent – do the project or don’t do it, you’ve already spent the money.
  2. “Pre-operating cost” can include both investments you’ve already made (sunk cost) and investments you haven’t made yet, that have to be made before you start operations. Any money you haven’t spent yet should still be considered.
  3. Well, my point is that it shouldn’t be included, but it often is. It is a mistake to do it, even though many people still do.
]]> By: girum http://tynerblain.com/blog/2006/03/24/definition-of-sunk-cost/comment-page-1/#comment-860690 girum Thu, 02 Feb 2012 11:17:42 +0000 http://tynerblain.com/blog/2006/03/24/definition-of-sunk-cost/#comment-860690 it is a good ways of expressing sunk cost .But the question is 1.why sunk cost is not included in economic analysis of the project? 2.is sunk cost mean pre operating cost ? 3.iif sunk cost is not included in financial and economic analysis why we bother about it ? it is a good ways of expressing sunk cost .But the question is
1.why sunk cost is not included in economic analysis of the project?
2.is sunk cost mean pre operating cost ?
3.iif sunk cost is not included in financial and economic analysis why we bother about it ?

]]> By: Michael http://tynerblain.com/blog/2006/03/24/definition-of-sunk-cost/comment-page-1/#comment-595 Michael Sun, 26 Mar 2006 23:30:08 +0000 http://tynerblain.com/blog/2006/03/24/definition-of-sunk-cost/#comment-595 Good discussion of sunk cost. In most companies, the points you make under the "There’s usually more at stake here" section are in full effect. As a result, most of the time it is not strictly a financial decision at all. Rather, the "non financial" factors play the critical role - for better or worse! - Michael http://michael.HighTechProductManagement.com/ Good discussion of sunk cost. In most companies, the points you make under the “There’s usually more at stake here” section are in full effect. As a result, most of the time it is not strictly a financial decision at all. Rather, the “non financial” factors play the critical role – for better or worse!

- Michael
http://michael.HighTechProductManagement.com/

]]>