Weston Steel purchased a new coal furnace six years ago at a cost of $2.2 million.Last year, the government changed the emission requirements and this furnace cannot meet those standards.Thus, the company can no longer use the furnace, nor has it been able to locate anyone willing to purchase the furnace.Given the current situation, the furnace is best described as which type of cost?

Question

Quizplus · Accepted Answer

The furnace is a sunk cost because the money spent on it cannot be recovered, and it cannot be used or sold due to the new emission requirements.

Weston Steel Purchased a New Coal Furnace Six Years Ago