A company purchases machinery costing $60,000 in October of 2014. Five years later, management discovers better, more efficient machine that could be purchased for $80,000 to replace the existing machine. Management has determined that they are able to sell the original machine for $15,000. In making the decision about buying the new machine, how much are total sunk costs?

Question

Quizplus · Accepted Answer

Sunk costs are costs that have already been incurred and cannot be recovered. The $60,000 spent on the original machine is a sunk cost.

A Company Purchases Machinery Costing $60,000 in October of 2014