Hartley's Meat Pies is considering replacing its existing delivery van with a new one. The new van can offer considerable savings in operating costs. Information about the existing van and the new van follow:

Sunk costs include ________.
A) the accumulated depreciation of the existing van
B) the original cost of the new van
C) the current salvage value of the existing van
D) the annual operating cost of the new van

Question

Hartley's Meat Pies is considering replacing its existing delivery van with a new one. The new van can offer considerable savings in operating costs. Information about the existing van and the new van follow:

Sunk costs include ________.

Sunk costs include ________.
A) the accumulated depreciation of the existing van 
B) the original cost of the new van 
C) the current salvage value of the existing van 
D) the annual operating cost of the new van

Quizplus · Accepted Answer

Sunk costs are costs that have already been incurred and cannot be recovered. In this case, the accumulated depreciation of the existing van is a sunk cost, as it represents the portion of the original cost of the van that has already been expensed and cannot be recovered. The original cost of the new van and the current salvage value of the existing van are not sunk costs, as they represent costs that have not yet been incurred or assets that can still provide value. The annual operating cost of the new van is a future cost and not relevant in determining sunk costs.

Hartley's Meat Pies Is Considering Replacing Its Existing Delivery Van