Mark is an engineer who has designed a telecommunications device. He is convinced that there is a big potential market for the device. Accordingly, he has decided to quit his present job and start a company to manufacture and market the device.Mark purchased a machine two years ago to make experimental boards. The machine will be used to manufacture the new board. The cost of this machine is:
A) an opportunity cost
B) a sunk cost
C) a differential cost
D) a period cost

Question

Quizplus · Accepted Answer

The machine's cost is a sunk cost because it was purchased two years ago and regardless of whether or not Mark starts his new company, the money spent on the machine cannot be recovered. Sunk costs are irrelevant in decision making as they are already incurred and cannot be changed.

Mark Is an Engineer Who Has Designed a Telecommunications Device