Final answer:
A sunk cost is an expenditure that is nonproductive and cannot be recovered; these costs should be ignored when making future business decisions.
Step-by-step explanation:
A sunk cost is an expenditure that has already occurred and cannot be recovered. In the context of business decision-making, sunk costs are considered nonproductive since they do not change and cannot be affected by current or future actions. This contrasts with variable costs, which a firm can alter depending on its production levels. Sunk costs might represent past errors in judgment, and the best practice is to ignore these costs when making future business decisions as they are not relevant to the costs and revenues that will affect future profitability. Sunk costs should be ignored when making decisions as they do not affect the potential benefits or costs of a current or future choice.