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Sagot :
It highlights sunk cost.
A sunk cost is a previously incurred expense that cannot be recovered. These costs should not be considered in decision-making. A sunk cost varies from future costs that a company may face, such as inventory purchase costs or product pricing decisions. Sunk costs are exempted from future company choices as they will remain constant regardless of decision outcome. A manufacturing company, for example, might have a number of sunk costs, such as the expense of machinery and equipment, as well as the cost of factory lease. Institutions should only take into consideration the following costs when making financial decisions, which include future costs that must still be incurred.
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