Asked by Sofia Bernal on Jun 30, 2024
Verified
Which of the following defines a sunk cost?
A) Cost of the next best alternative
B) Cost of producing an additional unit
C) An asset with no scrap value
D) Total cost of producing a product
Sunk Cost
Expenses that have already been incurred and cannot be recovered, which should not influence future business decisions.
Scrap Value
The estimated resale value of an asset after its useful life is over and it is deemed to no longer be usable for its intended purpose.
- Understand the effect of sunk costs on investment decisions.
Verified Answer
ZK
Zybrea KnightJul 04, 2024
Final Answer :
C
Explanation :
A sunk cost is a cost that has already been incurred and cannot be recovered, such as an asset with no scrap value. Option A refers to opportunity cost, B refers to marginal cost, and D refers to total cost which includes variable costs that can still be recovered.
Learning Objectives
- Understand the effect of sunk costs on investment decisions.
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