Zanatech's market for its remote control has changed significantly, and Zanatech has had to drop the selling price per unit from $45 to $38.There are some units in the work in process inventory that have costs of $30 per unit associated with them.Zanatech can sell these units in their current state for $22 each.It will cost Zanatech $11 per unit to rework these units so that they can be sold for $38 each.Which of the following is the amount of sunk costs in this problem?
A)$30 per unit
B)$11 per unit
C)$38 per unit
D)$15 per unit

Question

Quizplus · Accepted Answer

Sunk costs are costs that have already been incurred and cannot be recovered. In this problem, the sunk costs would be the $30 per unit associated with the work in process inventory. These costs have already been incurred and Zanatech cannot recover them. Therefore, the answer is A. The costs of reworking the units and the new selling price are not sunk costs as they are still relevant and have a future impact on Zanatech's decisions.

Zanatech's Market for Its Remote Control Has Changed Significantly, and Zanatech