|Fixed costs vs. sunk costs
||[Apr. 24th, 2005|08:43 pm]
Business Strategy Resources and Discussion
Fixed costs do not vary with the quantity of output produced. Sunk costs are unrecoverable costs. The two concepts are independent of each other, but are usually related.|
An example of a fixed cost that is not sunk: auto insurance paid monthly. It is fixed in that the amount paid does not depend on miles driven per month (let's suppose this). But it is not sunk, as the insurance can be canceled any time.
An example of a sunk cost that is not fixed: money you paid for three rolls of film on a final sale. As you cannot return the film, the money is sunk. But it is obviously a variable cost.