The distinction between sunk and incremental costs is most helpful in answering which question?
A)How many more people should be added to the production process?
B)What is the correct price to charge?
C)Should we begin to build a new factory?
D)Should we continue developing a new software application that we began last year?

Question

Quizplus · Accepted Answer

The distinction between sunk and incremental costs is most helpful in determining whether to continue with a project, such as the development of a new software application. Sunk costs are costs that have already been incurred and cannot be recovered, while incremental costs are the additional costs that would be incurred if the project continues. By weighing the incremental costs against the potential benefits of completing the project, decision-makers can determine the best course of action. This distinction is less relevant for questions about adding people to the production process, determining the correct price to charge, or building a new factory.

The Distinction Between Sunk and Incremental Costs Is Most Helpful