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sunk cost

Forums › ACCA Forums › ACCA FM Financial Management Forums › sunk cost

  • This topic has 2 replies, 2 voices, and was last updated 7 years ago by xuruofanangela.
Viewing 3 posts - 1 through 3 (of 3 total)
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  • October 29, 2015 at 8:07 pm #279619
    xuruofanangela
    Member
    • Topics: 2
    • Replies: 1
    • ☆

    Hi,
    I have question about sunk cost. As we all know sunk cost is the cost which incurred in the past therefore it is irrelevant cash flow to the project.
    But there is a question in my assignment, said a research has been carried out at a cost of 500,000 before the company investing in the new project. And the cost will be paid after the investment.
    So I want to ask if this 500,000 relevant to this project. I am confused because the research happened in the past but the cost incurred in this accounting period. So I am not sure whether this is sunk cost or not.

    October 30, 2015 at 1:33 pm #279678
    lavinia69
    Participant
    • Topics: 5
    • Replies: 121
    • ☆☆

    Hello,
    Sunk cost are costs that are incurred what ever you decide about the project.
    You would have to pay this £500,000 even if you decided not to proceed with the project, hence it is a sunk cost.
    The timing of the payment is irrelevant.

    October 31, 2015 at 9:29 pm #279846
    xuruofanangela
    Member
    • Topics: 2
    • Replies: 1
    • ☆

    Thank you for your reply! It is really helpful!

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