An insurance office owns a large building downtown. The sixth floor of this building currently houses its entire Human Resources Department. After carrying out a survey to see whether the sixth floor could be rented and for what price, the company must decide whether to split the Human Resources Department between currently unoccupied spaces on several floors and rent out the entire sixth floor or to leave things as they currently are. Which of the following should NOT be considered when deciding whether to rent out the sixth floor?
A) the amount obtained by renting the sixth floor
B) the cost of refurbishing the new space to be occupied by the Human Resources Department
C) cost involved with a loss of efficiency resulting from the Human Resources Department being split between several spaces
D) the cost of the research into the feasibility of renting the sixth floor

Question

Quizplus · Accepted Answer

The cost of the research into the feasibility of renting the sixth floor should not be considered when deciding whether to rent out the sixth floor because it is a sunk cost and cannot be recovered. The other options (A, B, and C) are all relevant factors that should be considered in the decision-making process.

An Insurance Office Owns a Large Building Downtown