A business anticipates future operating revenues of $200 million, future operating costs of $150 million, and sunk costs of $60 million. This business should:

Question

Quizplus · Accepted Answer

The business should continue operations because the future operating revenues ($200 million) are greater than the future operating costs ($150 million). Sunk costs ($60 million) are irrelevant to this decision because they are costs that have already been incurred and cannot be recovered. The ratio of future revenues to future costs is 1.33 which is not less than 2, but that is not a relevant criterion for this decision.

A Business Anticipates Future Operating Revenues of $200 Million, Future