Which of the following statements is CORRECT?
A) A sunk cost is any cost that must be expended in order to complete a project and bring it into operation.
B) A sunk cost is any cost that was expended in the past but can be recovered if the firm decides not to go forward with the project.
C) A sunk cost is a cost that was incurred and expensed in the past and cannot be recovered if the firm decides not to go forward with the project.
D) Sunk costs were formerly
E) A good example of a sunk cost is a situation where Home Depot opens a new store, and that leads to a decline in sales of one of the firm's existing stores.

Question

Quizplus · Accepted Answer

A sunk cost is a cost that has already been incurred and cannot be recovered. It is an irretrievable cost that should not be considered when making future decisions. Option A is incorrect because completing a project and bringing it into operation is not the definition of sunk cost. Option B is also incorrect because sunk costs cannot be recovered. Option D is a misleading option as sunk costs are still relevant in decision making. Option E is not an example of sunk cost, but is an example of a potential consequence of a new project.

Which of the Following Statements Is CORRECT