A company is considering a new project that will cost $19,000. This project would result in additional annual revenues of $6,000 for the next 5 years. The $19,000 cost is an example of a(n):
A) Sunk cost.
B) Uncontrollable cost.
C) Fixed cost.
D) Opportunity cost.
E) Incremental cost.

Question

Quizplus · Accepted Answer

The $19,000 cost is an incremental cost, as it is the additional cost required to undertake the new project. Sunk costs are costs that have already been incurred and cannot be recovered, while uncontrollable costs cannot be influenced by the company's actions. Fixed costs are costs that do not change with the level of production, and opportunity costs are the benefits foregone by pursuing one option over another.

A Company Is Considering a New Project That Will Cost