Engineering Economics

Sunk Cost

Money already spent that cannot be recovered whichever alternative is chosen, and so is ignored in the decision.

A sunk cost lies in the past: a design fee already paid, the purchase price of equipment already owned, the book value of a machine. Because it is the same under every alternative being compared, it cannot change which alternative is best.

Exam questions include sunk costs deliberately, to test whether they are left out. In a replacement study, the old machine’s value enters only as what it could be sold for today, not as what it cost or what the books say it is worth.

How much of the FE Civil exam is Engineering Economics?