• Sunk costs are those that have already been incurred and are not recoverable.
  • In business, sunk costs are usually not factored into future decisions as they are considered irrelevant to current and future budgetary issues.
  • Sunk costs are contrasted with relevant costs, which are future costs that have yet to be incurred.
  • The sunk cost fallacy is a psychological barrier that binds people to failed attempts simply because they put resources into it.
  • Examples of sunk costs include wages, insurance, rent, non-refundable deposits or repairs (provided that each of these items is non-refundable).