Use Relevant Cost, Not Sunk Cost

Sunk cost belongs in the lesson learned, not in the go-forward model. Managers are human, so past effort creates emotional gravity. A half-built system, prepaid conference, or underperforming campaign feels like it must be defended because money has already gone into it. Management accounting counters that reflex with decision relevance. For a choice between alternatives, include only future costs and benefits that change depending on the option chosen. That means the old implementation spend is not part of whether to continue, except as evidence about capability or risk. The remaining contractor cost may be relevant. The avoidable cloud run-rate may…

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