sunk cost. relevant cost.

[김시희[국제관광]]

Sunk cost is like spilled milk. It can not be changed as they have already occurred in the past.

You can not do any thing about it.

For instance, you paid $1,000 for a feasibility study for a project.

It is not going to change whether you decide to go ahead with the project or not.

Relevant cost is the costs that change depending on the decision or course of action that can be taken.

Thus, the relevant costs are those that differ depending on the options.

You need to determine whether spending your resources for that option is worth it.

 As regards cost of a dorm or an apartment across the street. Obviously you will chose the option which benefits you the most considering the facilities offered by each option. Both costs are relevant since these costs will be incurred in the future when you select the best option. You must also consider the opportunity cost, the benefit foregone by selecting one option over the other.

 So in this case, you need choose or decide secific option that would give you the best among many other options. You will have to consider Opportunity cost as well. 

Actually, I got confused here between relevant cost and opportunity cost as both cost are dealing with choosing the option.

To avoid getting myself confused, Here's some definition of opportuity cost.

 Opportunity costs
A company often has a choice of options. For example, does it choose to use a scarce resource (what i've learned from economy class, the professor insisted that opportunity cost always comes with the concept of scarcity. cuz that way you need to make decision.. too basic.skip this part..sry..haha) for Contract A instead of Contract B?

 If it does choose Contract A then Contract B will be lost the chance that could've brought a contribution for the company.

The company made a decision to pick Contract A which can make a bigger contribution. And in this case, The contribution that Contract B could've generated will be an opportuniy.

This is an example of an opportunity cost, a relevant cost for decision-making. By definition, an opportunity cost is one which measures the cost of sacrificing one course of action in favour of another.

After the class and whole googling. I figured out some key word for each costs to make myself understand better..  

Sunk cost-spilled milk, Relevant cost-differ, Opportunity-sacrifice..

It has taken long for me to get all of this exact concept since i've been weak in mathmetics in born. haha

well, but there are more like "conceptual"(like the way professor Hyun emphasize all the time^^*) stuff than mathmetical problem i guess..  

Most references are basically portal sites such as google, yahoo..  

and i assume many of you have checked out this one..

http://classes.bus.oregonstate.edu/spring-06/ba422/Management%20Accounting%20Chapter%203.htm

but for someone didnt see it.

Thank you so much professor Hyun for having me as your student. Its been always great to have the professor like you making us proud of ourselves. I truly being encouraged by those effort you make for us.

Tomorrow will be rainy day since my knees hurt so bad..My body always tells me how the weather would be..its like forecaster,so to speak....awww im getting old..haha Hope everyone have a good night.. : )