Paula's Kennels is located in a small city in Nova Scotia. The company employs three pet attendants, four pet groomers, and two front office staff who book appointments and keep records. The Kennel provides a range of services for dogs and cats including boarding, grooming, and obedience training. The grooming area includes a small retail section that carries dog and cat food, pet supplies, and toys. Which of the following is a sunk cost for any cost object related to Jackie's Kennels?
A) Cost of the automobile Paula is planning to buy for pet transportation
B) Cost of existing computer equipment used to keep company records
C) Cost of annual wages for full-time employees
D) Cost of rent for the next period

Question

Quizplus · Accepted Answer

A sunk cost is a cost that has already been incurred and cannot be recovered. The cost of the automobile (A), the cost of annual wages for full-time employees (C), and the cost of rent for the next period (D) are all future costs that have not yet been incurred and therefore not sunk costs. The cost of existing computer equipment (B) used for company records, on the other hand, is a cost that has already been incurred and cannot be recovered, making it a sunk cost.

Paula's Kennels Is Located in a Small City in Nova