A cost that has already been paid,or the liability to pay has already been incurred,is a(n):
A) salvage value expense.
B) net working capital expense.
C) sunk cost.
D) opportunity cost.
E) erosion cost.

Question

Quizplus · Accepted Answer

A sunk cost is a cost that has already been incurred and cannot be recovered. It is therefore irrelevant to future decision making, as it has already been paid and cannot be avoided or altered. Therefore, option C is the only choice that accurately describes a cost that fits this definition. Option A (salvage value expense) refers to an estimate of the value of an asset at the end of its useful life, while option B (net working capital expense) is the difference between current assets and current liabilities. Option D (opportunity cost) refers to the cost of passing up the next best alternative when making a decision, and option E (erosion cost) refers to the gradual loss of value or usefulness of an asset over time.

A Cost That Has Already Been Paid,or the Liability to Pay