A comparison of sunk, irrelevant, and incremental costs

There are a lot of different ways that companies do their accounting. Some companies might put sunk costs into their books, while other companies might put incremental costs, and others might put irrelevant costs into their books, while others might put all of them. Here is a comparison of sunk, irrelevant, and incremental costs.

The first thing is what are sunk costs? A sunk cost is a cost that has been put into something that ends up not doing what you need it to do and you find something that can replace it for less then what you are going to be into the other thing as far as time and money goes. For example if some one has a program they are working on for their company and it has cost them $2000 this far and they are still trying to get all the bugs out and get it running faster, but then they find a program that they can buy for $2000 and it does everything they need it to do. The company will consider the program they were working on a sunk cost and leave it at that. It is cost that is lost because they found something that they could use without having to put any more money into it.

The second thing is what are irrelevant costs? Irrelevant costs are costs that are either positive or negative. They are also costs that might be relevant for some situations but irrelevant to others. For example if one person says that the value of something is one thing it may be relevant right then but in another situation the same thing might be valued at something else making it irrelevant.

The third thing is what are incremental costs. Incremental costs are costs that are occurred that are not expected. For example you might have a project that you have forecasted is going to cost a certain amount but it end up costing you more. The money that you use to pay for the extra money that it is costing you is considered incremental costs.

Now that you know what all of the different terms mean here is a comparison of sunk, irrelevant, and incremental costs. In your company you should look into using all of these costs because they can help you plan for every different situation. It is good to use incremental costs for the sunk costs that you might incur. You can also use incremental costs to supplement some of the incremental costs. For example you might have irrelevant costs because of values going up on certain things that you might be using for projects and you can use incremental costs to cover the amount you spend because of the irrelevant costs.

Depending on the different costs that your company will incur do to all of theses different things will help you to see why you need sunk, irrelevant, and incremental costs as part of your accounting. You just have to compare all of them and decide how much you want to focus on each individual cost. This will help you determine how much money you want to put into different accounts. You will also want to make sure that you pay attention to the different costs so you know if you have a sunk cost that you know when to cut it off. Or if you have incremental costs that you know where you are at and are not spending more money than needed. These are all things that you can do to compare sunk, irrelevant, and incremental costs.