A company spends $20 million researching whether it is possible to create a durable plastic from the process waste from feedstock preparation. How should the $20 million best be considered?

Question

Quizplus · Accepted Answer

The $20 million spent on research is a sunk cost because it has already been incurred and cannot be recovered regardless of the outcome of the research. Sunk costs are typically not relevant in decision making since they cannot be changed or undone.

A Company Spends $20 Million Researching Whether It Is Possible