A firm is deciding whether or not to close down its plant and modernize by installing new technology. Which of the following should management ignore when making the decision?

Question

Quizplus · Accepted Answer

The cost of the present plant is a sunk cost and cannot be recovered, so it should not be factored into the decision of whether or not to close down the plant and modernize. The cost of lost sales and added labor costs are relevant costs and should be considered in the decision-making process.

A Firm Is Deciding Whether or Not to Close Down