Differentiate between sunk cost and shut down cost
Answers
Differerence between sunk cost and shutdown cost are
A corporation or an institution may have to discontinue its assistance for a period on the account of some momentary difficulties, e.g, insufficiency of raw substance, non-availability of certain labor, etc. During this period, though no responsibility is developed yet numerous fixed payments, such as rent and protection of buildings, devaluation, maintenance, etc, for the entire plant will have to be obtained. Such expenses of the former plant are classified as shutdown values.
The former costs are known as a sunk cost. These are the conditions which have been written by an arrangement that was contrived in history and cannot be substituted by any arrangement that will be presented in the future. Investments in industry and machine, compositions, etc. are important diplomats of such damages. Since sunk costs container be exchanged by decisions made at the later picture, they are inapplicable for decision- making.