Before Andrew took a prestigious accounting job, he estimated that he would have to spend $10,000 on new suits. For a job with a less prestigious company he would only have to spend $2,000 on new suits. When making a smart choice between jobs, the $8,000 difference in clothing costs is irrelevant because it is a sunk cost.

Question

Quizplus · Accepted Answer

The $8,000 difference in clothing costs is not a sunk cost because it represents a future expense that Andrew would incur only if he chooses the more prestigious job, thus it should be considered in his decision-making process. Sunk costs refer to expenses that have already been incurred and cannot be recovered, which is not the case here.

Before Andrew Took a Prestigious Accounting Job, He Estimated That