Which of the following statements best describes a sunk cost?
A)A sunk cost is any cost that must be expended in order to complete a project and bring it into operation.
B)A sunk cost is any cost that was expended in the past but can be recovered if the firm decides not to go forward with the project.
C)A sunk cost is a cost that was incurred and expensed in the past and cannot be recovered if the firm decides not to go forward with the project.
D)A sunk cost is any cost not directly related to the physical work required to complete the project.

Question

Quizplus · Accepted Answer

A sunk cost is defined as a cost that has already been incurred and cannot be recovered. Therefore, option C, "A sunk cost is a cost that was incurred and expensed in the past and cannot be recovered if the firm decides not to go forward with the project," is the best description of a sunk cost. Option A is incorrect because it defines a cost that must be expended in order to complete a project, which is not necessarily a sunk cost. Option B is incorrect because it describes a cost that can be recovered, which is not applicable to sunk costs. Option D is incorrect because it describes a cost that is not directly related to the physical work required to complete the project, which is not necessarily a characteristic of sunk costs.

Which of the Following Statements Best Describes a Sunk Cost