What is a Sunk Cost?

Question

What is a Sunk Cost?

Answer 1

1- A cost that has already been incurred and cannot be reversed, which therefore cannot be avoided by current or future action. Sunk costs should therefore be irrelevant to current decisions.

2- A cost incurred in the past that will not be affected by any present or future decision. Sunk costs should be ignored in determining whether a new investment is worthwhile.

Answer 2

Its money that once spent, is "sunK' or essentially gone.  For example, if you are buying software and then want to upgrade it- the cost of the software is a sunk cost.  Its a set, known amount.  The upgrades would be a variable cost, as it would depend on what you want/need.