Question

A sunk cost can best be described as: Group of answer choices a cost that has already been incurred and cannot be removed. a form of financing cost. the cash flows of a new project that come at the expense of existing projects. an important cost to include in the capital budgeting process. the same thing as an opportunity cost

Answer 1

Answer:

Sunk Cost

A sunk cost can best be described as:

a cost that has already been incurred and cannot be removed.

Explanation:

A sunk cost for Manufacturer X is a cost that has already been incurred.  It is irrelevant for any future decision making because it cannot be recovered or removed. By its nature, a sunk cost is a fixed cost.  For example, the costs of purchasing an item of equipment, building an office building, and other noncurrent expenditure are sunk costs .  If management is making  decisions based on differential or incremental costing, such sunk costs are not considered.