What are sunk costs? Explain whether they are relevant costs.

A.

Sunk costs are costs that are based on a previous commitment and cannot be recovered. Therefore, they are not relevant costs for the decision.

B.

Sunk costs are relevant since it is a cost that does not vary in the short run with a specified activity.

C.

Sunk costs are always relevant because they can be influenced by whatever alternative the manager chooses.

D.

Sunk costs are always fixed costs making them irrelevant.