Asked by Kaylee Greydanus on Jun 09, 2024
Verified
In a decision concerning replacing old equipment with new equipment the book value of the old equipment can be considered a sunk cost.
Sunk Cost
A cost that cannot be changed by any present or future decision.
Book Value
The difference between the cost of a depreciable asset and its related accumulated depreciation.
- Differentiate between pertinent and non-recoverable expenses in scenarios involving decision-making.
Verified Answer
HS
Harry SinghJun 13, 2024
Final Answer :
True
Explanation :
Sunk costs are costs that have already been incurred and cannot be recovered, regardless of future decisions. The book value of old equipment falls under this category as it is the historical cost of the equipment and does not change with current market conditions or future decisions. Therefore, it should not be considered in the decision to replace the old equipment with new equipment.
Learning Objectives
- Differentiate between pertinent and non-recoverable expenses in scenarios involving decision-making.