You spent $500 last week fixing the transmission in your car.Now,the brakes are acting up,and you are trying to decide whether to fix them or trade the car in for a newer model.In analyzing the brake situation,the $500 you spent fixing the transmission is a(n)________ cost.

Question

Quizplus · Accepted Answer

The $500 spent on fixing the transmission is a sunk cost, which means it is a cost that has already been incurred and cannot be recovered. This cost should not be considered in the decision-making process of whether to fix the brakes or trade in the car. The decision should be based on the incremental or relevant costs, which are the costs and benefits that will change depending on the decision made. Therefore, option B is the correct answer.

You Spent $500 Last Week Fixing the Transmission in Your