If a firm has already paid an expense or is obligated to pay one in the future, regardless of whether a particular project is undertaken, that expense is a(n) ________________.

Question

Quizplus · Accepted Answer

A sunk cost is a cost that has already been incurred and cannot be recovered, regardless of whether a project is undertaken or not. This cost is irrelevant to decision-making because it cannot be avoided or altered. Incremental cash outflows and opportunity costs are relevant costs that should be considered in making decisions. Expensible item is not a relevant accounting term.

If a Firm Has Already Paid an Expense or Is