g "Mell Co. manufactured 100 personal computers at a cost of $30,000. It can sell them as is for $65,000, or install hard disks in them for $25,000 and sell them for $105,000. The $30,000 original manufacturing cost is:"
This cost cost is a sunk cost because it had already been incurred and it is not relevant for decision making again. It cannot be reversed again. Since decision-making is a forward-looking process, sunk costs should be disregarded in the decision-making process.
Example of sunk cost is also money spent on research and development of a product.
