Planet Design Services, Inc., is considering replacing a machine. The following data are available:

Which of the data provided in the table is a sunk cost?
A) the annual cash operating costs of the old machine
B) the annual cash operating costs of the replacement machine
C) the disposal value of the old machine
D) the original cost of the old machine

Question

Planet Design Services, Inc., is considering replacing a machine. The following data are available:

Which of the data provided in the table is a sunk cost?
A) the annual cash operating costs of the old machine 
B) the annual cash operating costs of the replacement machine 
C) the disposal value of the old machine 
D) the original cost of the old machine

Quizplus · Accepted Answer

A sunk cost is a cost that has already been incurred and cannot be recovered, regardless of the decision made. The original cost of the old machine is a sunk cost because it has already been incurred and cannot be recovered. The other options are all future costs that will be incurred if a decision is made to replace the machine.