A Las Vegas hotel is considering disposing of a drinks vending machine as it would like to place a hotel phone in the space occupied by the vending machine. The vending machine has three years of $2,500 per annum depreciation charges still to be expensed. When making this decision, the $2,500 annual depreciation charges can be viewed as:

Question

Quizplus · Accepted Answer

The $2,500 annual depreciation charges are sunk costs because they have already been incurred and cannot be recovered. Therefore, they should not be considered in the decision of whether to dispose of the vending machine or not.

A Las Vegas Hotel Is Considering Disposing of a Drinks