Sunk cost is the amount spend on something you no longer do. Usually a cancel project, or could be an option in the project that was cancel after some or lot was spend on. Saving Changes...
Margaret LoveSenior Instructor| VelociteachGreenville, Sc, United States
Not entirely sure I understand the question as it relates to EV factors, but I would say at the highest level that sunk costs would be equal to actual costs. Saving Changes...
Thanks for th explaination, however I had mentioned this in very first sentence of my discussion (amount spent already) Saving Changes...
Thomas WalentaGlobal Project Economy ExpertHackenheim, Germany
Do not think there is a formula between actual cost AC, present value PV, earned value EV. Each of them is calculated from different parameters that are independent:
- AC - occured cost of work in the project as of today
- PV - planned cost of the work, that should have been done until today
- EV - artificial sum of all planned cost for activities that are completed (0:100 formula).
The EV formulas for e.g. CPI and SPI include EV, AC and PV.
Thanks for the reply Mr Kiron. I understand from your description, sunk cost having the explanation as "expended cost", sunk cost includes those cost spent towards project completion in an indirect manner (indirect cost, miscellaneous cost). Saving Changes...
Thomas WalentaGlobal Project Economy ExpertHackenheim, Germany
Basically, sunk cost come only into play if you review a project's business case (if there is one) and need to decide to stop or continue the project. The rule is only to compare the investment needed to complete the project with the expected financial benefits, a ROI excluding the investment spent already.
EV with AC etc. has a different use (to monitor a running project), though Kiron is right, AC might be included in sunk cost if not recoverable. Saving Changes...
Do not think there is a formula between actual cost AC, present value PV, earned value EV. Each of them is calculated from different parameters that are independent:
- AC - occured cost of work in the project as of today
- PV - planned cost of the work, that should have been done until today
- EV - artificial sum of all planned cost for activities that are completed (0:100 formula).
The EV formulas for e.g. CPI and SPI include EV, AC and PV.
AC is the closest to sunk cost.
Thanks for the detailed explanation. Saving Changes...
