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sunk costs, opportunity costs, Goldratt’s Theory of Constraints

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Please provide your thoughts on these two questions, and provide APA references:

1. Why is it that sunk costs are never relevant to a decision whereas opportunity costs are always relevant?

2. Why do you think Goldratt's Theory of Constraints received so much press by the business community?

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The expert determines why sunk costs are never relevant to a decision whereas opportunity costs are always relevant. The response addresses the query posted in 511 words with APA references.

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The response addresses the query posted in 511 words with APA references

//The opportunity cost is an important aspect to be considered in decision-making while the sunk cost is ignored. In this context, in the following discussion, the relevancy of sunk costs and opportunity costs has been explored with the help of an example. In the next section, the importance of Goldratt's theory of constraints for the business organizations has been discussed.//

Answer-1:

The sunk costs are not considered relevant whereas the opportunity costs are always considered relevant for the purpose of decision making. This can be better understood with an example given below:

Example:

Suppose a company has incurred $100 million on a project until the time the project is 50% complete. Now, the buyer of this project becomes insolvent and is ...

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Ashish Sharma, MBA (IP)
Education
  • MBA (IP), International Center for Internationa Business
  • BBA, University of Rajasthan
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