GL Plastics spent $1,200 last week repairing a machine. This week the company is trying to decide if the machine could be better utilized if they assigned it a proposed project. When analyzing the proposed project, the $1,200 should be treated as which type of cost?

Question

Quizplus · Accepted Answer

The $1,200 cost for repairing the machine is a sunk cost since it is a past cost that cannot be recovered regardless of the company's decision to assign the machine to the proposed project or not. Therefore, it should not be considered when analyzing the feasibility of the proposed project.

GL Plastics Spent $1,200 Last Week Repairing a Machine