Edison Company has 5,000 obsolete desk lamps that are carried in inventory at a manufacturing cost of $45000. If the lamps are reworked for $20,000, they could be sold for $37,000. Alternatively, the lamps could be sold for $9,000 for scrap. In a decision model analyzing these alternatives, the sunk cost would be:
A) $9,000
B) $8,000
C) $43,000
D) $45,000

Question

Quizplus · Accepted Answer

The sunk cost is the original manufacturing cost of $45,000, which is a past cost that cannot be recovered, regardless of the future action taken.

Edison Company Has 5,000 Obsolete Desk Lamps That Are Carried