A company is expanding and has already signed a lease on new office space that costs $10,000 per month.The company also needs a new information system and hired a consultant to recommend new software.The consultant was paid $5,000 for her recommendation.Now the company is trying to make a choice between three competing software products.In the capital budgeting decision to purchase new software,the monthly rent for the office space is ________ and the consultant's fee is ________.

Question

Quizplus · Accepted Answer

The monthly rent for the office space is a sunk cost because it is a cost that has already been incurred and cannot be recovered. The consultant's fee is also a sunk cost for the same reason.

A Company Is Expanding and Has Already Signed a Lease