Sunk costs are irrelevant,but irrelevant costs are not sunk

Also please let me know that whether Committed Costs are part of Sunk Costs or not.

As per Sanjay sir there are 3 types of costs.
1. Non Relevant Cost
2. Sunk Cost
3. Irrelevant Cost

Sunk Cost & Irrelevant costs are 2 parts of non- relevant cost

https://www.youtube.com/watch?v=C0Q8prB0v4M

sunk cost are costs incurred in past whereas irrelevant cost are costs which are not relevant in decision making. irrelevant cost comprises sunk costs(past costs), future costs already commited and future costs which are same in different alternatives.

therefore sunk costs are part of irrelevant cost but irrelevant cost also include future costs.

regards

Anurag

Hello Nancy, Its really simple. As per Sarvanna Prasad sir, Colin Drury & Suggested answers for May 06, Irrelevant costs include sunk costs, avoidable costs & other future common costs. Please don't go the man in video, who is teaching wrong basic concepts of Relevant Costing. I have shown this video to Sarvanna sir, he said to me that this guy of video knows nothing and is illogically confusing students.

Please don't go for video of this jerk.

Suggested Answers of May 06 says:

Sunk costs are costs that have been created by a decision made in the past and that cannot be changed by any decision that will be made in the future.  For example, the written down value of assets previously purchased are sunk costs.  Sunk costs are not relevant for decision making because they are past costs.

But not all irrelevant costs are sunk costs.  For example, a comparison of two alternative production methods may result in identical direct material costs for both the alternatives.  In this case, the direct material cost will remain the same whichever alternative is chosen.  In this situation, though direct material cost is the future cost to be incurred in accordance with the production, it is irrelevant, but, it is not a sunk cost.

Joseph is right.

The question should read like:

"All sunk costs are irrelevant costs but all irrelevant costs are not sunk costs."--Explain why?(or the like)

Sunk cost as you might be already aware is a cost which has been incurred already and thus is not relevant for decision making.

Irrelevant costs is a broader category:

Examples of irrelevant costs are fixed overheads, notional costs, sunk costs and book values.The gamut is wider for irrelevant costs.

Committed is slightly different than sunk costs,it is similar to sunk costs but there exists a basic difference.Committed costs are as a result of a previous decision and the "charge" may not yet be incurred or cash released.These are costs which are 'committed' by management.

Something committed contractually is effectively a sunk-cost and thus is an irrelevant cost for the decision making process under germane consideration.

In Sunk-cost the money is "sunk"(remember like) buried in the ground!

In committed it is like a dead-body yet to be buried but then,you plan to bury it soon!(Yeah,I know my example is gross but then I guess the concept becomes "sunk" in you and you "commit" it well in your memory!)

Best of all Lucks,

Mythreya