Answer:

Incremental Costs

Incremental or marginal costs come from changes in your activity. Manufacturing more parts or changing the hours a service business is open would CAUSE incremental costs to accrue. Variable costs are incremental because they vary with activity. If you pay your employees hourly and you need them to work more hours, your labor costs will increase incrementally. If you pay delivery drivers and decide to increase the amount of deliveries, you will pay more in labor costs as well as more for fuel.

 Sunk Cost

Sunk costs, also known as fixed costs, are costs that you have already incurred and should not be a factor in a decision. For example, if you decide to have your employees work three shifts instead of two, your rent should STAY the same. ASSUMING you had to pay to obtain a license to operate your business, increasing or decreasing production will not change the amount you spent to get that license. Increasing or decreasing production will not affect the amount of money you already spent designing and testing a product. You should consider only DECISIONS involving changes in activity as variable costs.

Hope this helps u : )