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Vaughn Manufacturing has several outdated computers that cost a total of $19,200 and could be...

Question:

Vaughn Manufacturing has several outdated computers that cost a total of {eq}\$19,200 {/eq} and could be sold as scrap for {eq}\$5,000 {/eq}. They could be updated for an additional {eq}\$2,000 {/eq} and sold. If Vaughn updates the computers and sells them, net income will increase by {eq}\$9,000 {/eq}. What amount would be considered sunk costs?

(a) {eq}\$21,200 {/eq}

(b) {eq}\$2,000 {/eq}

(c) {eq}\$9,000 {/eq}

(d) {eq}\$19,200 {/eq}

Sunk Cost:

The costs incurred in the past is treated as a sunk cost. A sunk cost is considered an irrelevant cost for decision-making purposes. Sunk cost does not affect the decision making.

Answer and Explanation:

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Sunk Costs: Definition & Examples

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Chapter 31 / Lesson 8
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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.


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