Two years ago, a company spent $450,000 on a consulting study that focused on the technology of the firm's operations.Now it appears that technology is noncompliant with existing regulations.New technology must replace the old project.The $450,000 would represent:

Question

Quizplus · Accepted Answer

The $450,000 spent on the consulting study represents a sunk cost, which refers to a cost that has already been incurred and cannot be recovered. The fact that the technology is now noncompliant with existing regulations means that the company cannot continue to use it, regardless of the cost that was initially incurred to develop it. Therefore, the cost is irrelevant to the decision of whether or not to replace the technology with a new project.

Two Years Ago, a Company Spent $450,000 on a Consulting