Truman University is thinking of opening an evening college. In figuring the cost of such a project, a figure is provided for lighting of parking lots. It is pointed out by the university's finance officer that a city ordinance requires that the parking lots be lighted whether there is an evening college in session or not. Lighting expenses in this case are:
A)opportunity costs.
B)alternative costs.
C)variable costs.
D)side effects.
E)sunk costs.

Question

Quizplus · Accepted Answer

The lighting expenses are considered sunk costs because they are unavoidable and will be incurred regardless of whether or not the evening college is open. They are not relevant to the decision of whether or not to open an evening college.

Truman University Is Thinking of Opening an Evening College