Weston Steel purchased a new coal furnace six years ago at a cost of $2.2 million. Last year, the government changed the emission requirements and this furnace cannot meet those standards. Thus, Weston's can no longer use the furnace nor have they been able to locate anyone willing to purchase the furnace. Given the current situation, the furnace is best described as which type of cost?

Question

Quizplus · Accepted Answer

The furnace is now a sunk cost, meaning that the money spent on it cannot be recovered and the asset has no resale value.

Weston Steel Purchased a New Coal Furnace Six Years Ago