A sunk cost is a cost that has already been incurred, and that is unrecoverable (Marshall, McManus & Viele, 2014). An example of sunk cost in college is the money paid for college tuition.
Discretionary cost
It is a cost which can be adjusted in the short-term at the discretion of the management. It is a cost which one can get by without, if necessary (Marshall, McManus & Viele, 2014). An example of discretion cost in college is money that is paid for a college trip.
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Committed cost
It is the cost which will be incurred to implement long-term policy decisions to which one has committed. It is a permanent cost and cannot be recovered (Marshall, McManus & Viele, 2014). An example of committed cost in college is the college admission fees, as it commits a student to the institution and the student cannot recover it.
Opportunity cost
It is the income forgone by choosing one alternative over another. It is the benefit a person or organization misses out on after choosing one alternative over another (Marshall, McManus & Viele, 2014). For example, in college, if there is a noncompulsory school trip for students, you must choose to go or remain at school reading. If you choose to go for the trip, the opportunity cost is the cash spent on the trip, and the time you would have spent reading. If you choose to remain in school and read, you would have saved $500 that you would have paid for the trip, but you would have lost the opportunity of a possibly fun experience on the trip.
Differential cost
It is the cost that differs according to alternative activities being considered (Marshall, McManus & Viele, 2014). It is the difference between the costs of two alternative decisions. For example, if the tuition fees for one semester in college A is $2,500, while that of college B is $3,500, the difference of $1,000 in tuition fees is the differential cost.
Allocated cost
It is a common cost which has been randomly allocated to an activity or product (Marshall, McManus & Viele, 2014). For example, if a student allocates $400 to buy textbooks for a given course, this is an example of allocated cost.
Reference
Marshall, D., McManus, W., & Viele, D. (2014). Accounting: What the Numbers Mean (10th Ed.). New York: McGraw-Hill Irwin. ISBN: 007802529-7
