A company is planning to replace an old machine with a new one. Which of the following is a sunk cost?
a. cost of the new machine
b. sales price of the old machine
c. future maintenance costs of the old machine
d. original cost of the old machine
When making decisions about what a company should or should not do with its funds, it must consider relevant costs. Future costs must be weighed against future profits to make sure a decision made is ideal and efficient.
Answer and Explanation: 1
The correct answer is D) The original cost of the old machine.
Regardless of what the business does moving forward, this cost is already paid and...
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fromChapter 31 / Lesson 8
Understand the sunk cost definition. Learn the meaning of sunk cost and sunk cost trap with the help of the sunk cost examples and sunk cost fallacy examples.