Sunk costs are characterized by which of the following?

Sunk costs are defined as costs that have already been incurred and cannot be recovered. This means that no matter what decision is made in the future, these costs will not be refunded or salvaged. The key characteristic of sunk costs is that they are past expenditures that should not influence current and future decision-making processes.

For example, if a company invested in a marketing campaign that did not provide the anticipated returns, the money spent on that campaign is a sunk cost. In future decision-making scenarios, that expenditure should not sway the company's choices, as it cannot be retrieved.

In contrast, other cost-related concepts affect decision-making differently. Future costs that can be avoided refer to potential costs that may be eliminated through certain choices, and recoverable costs signify that some expenditures might still be retrieved under specific circumstances. Lastly, variable costs are those that fluctuate with production levels, distinct from the fixed nature of sunk costs.