Mohammad KhanDeputy Vice President, Program Management| MetLife BangladeshDhaka, Bangladesh
A sunk cost is a cost that has incurred, and which cannot be recovered. Actual cost is also the cost incurred at the same point. Can the actual cost be recovered? To my understanding, No, we cannot recover. So what is the difference between them? Saving Changes...
It depends on how you are using the term. Either could be used to describe all the costs incurred to date or that can't be avoided at a future date.
In EVM,actual cost relate to the planned work. Planned value is the amount expected to complete a task. Earned value is the amount of the task completed. Actual cost is the expenses required to achieve the earned value.
If your project incurs some penalty, such as a fine, that is not planned work so the cost is not related to some itemized task in your plan. It is sunk cost however as in your example.
If the actual cost is considered the cost of the planned work in the EVM terminology, then the sunk cost is the planned work performed (AC), plus other unplanned costs. Saving Changes...
Senior Projects Manager | Field & Marten AssociatesNew Westminster, British Columbia, Canada
Mohammad
Kiron’s feedback is spot on. In contracts we usually have a clause for termination and it mentions that committed cost for certain things needs to be paid in case of termination.
Actual Cost is what you actually spent so far but Sunk Cost is Actual Cost + Any additional committed cost that you should pay in case of termination is it is irrecoverable.
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