What is a sunk cost quizlet?

(1) Sunk costs (A sunk cost is a cost that has already been incurred and cannot be avoided regardless of what a manager decides to do.) For example, the purchase price of equipment is a sunk cost. (2) Future costs that do not differ between the alternatives. Hint: A fixed cost is not always an irrelevant cost.

What is the definition of a sunk cost quizlet?

Sunk Costs. is a cost that has already been incurred and cannot be recovered. Prospective Costs. are costs that may be incurred or changed if an action is taken.

What is the meaning of sunk cost?

sunk cost, in economics and finance, a cost that has already been incurred and that cannot be recovered. In economic decision making, sunk costs are treated as bygone and are not taken into consideration when deciding whether to continue an investment project. Related Topics: cost.

What is an example of a sunk cost quizlet?

A good example of a sunk cost is money that a banking corporation spent last year to investigate the site for a new office, then expensed that cost for tax purposes, and now is deciding whether to go forward with the project.

What is sunk cost with example?

A sunk cost refers to money that has already been spent and cannot be recovered. A manufacturing firm, for example, may have a number of sunk costs, such as the cost of machinery, equipment, and the lease expense on the factory.

Which of the following is a sunk cost?

A sunk cost, sometimes called a retrospective cost, refers to an investment already incurred that can’t be recovered. Examples of sunk costs in business include marketing, research, new software installation or equipment, salaries and benefits, or facilities expenses.

Which item is not an example of a sunk cost?

Answer and Explanation: The laptop is not a sunk cost because it has some resale value.

Is sunk cost a fixed cost?

Sunk costs and fixed costs are two different types of costs. A sunk cost is always a fixed cost because it cannot be changed or altered. A fixed cost, however, is not a sunk cost, because it can be stopped, for example, in the sale or return of an asset.

Why is sunk cost important?

Importance of sunk costs



If an industry has high sunk costs – then this creates a barrier to entry. A firm will be more reluctant to enter the industry if it needs to spend a lot of money – that it can’t get back if it needs to leave.

What is mean by sunk?

Sunk is the past participle of sink. 2. adjective [verb-link ADJECTIVE] If you say that someone is sunk, you mean that they have no hope of avoiding trouble or failure. [informal]

What is the difference between a sunk cost and an opportunity cost quizlet?

An opportunity cost is the benefit that is lost when rejecting some course of action. A sunk cost is a cost that has already been incurred and that cannot be changed by any future decision.

What is a sunk cost How does it affect the decision making process?

In both economics and business decision-making, sunk cost refers to costs that have already happened and cannot be recovered. Sunk costs are excluded from future decisions because the cost will be the same regardless of the outcome. The sunk cost fallacy arises when decision-making takes into account sunk costs.

What are sunk costs chegg?

Sunk cost is a type of cost that has already been incurred in a business and is known to be unrecoverable. However, sunk costs should not be considered when making future decisions as it will lead to making inappropriate choices.

Is Buying a Car a sunk cost?

Unlike gasoline and parking, which are relatively fixed and recurring expenses, a car is a sunk cost–the purchase is in the past, and much of its value is irretrievable.

How do you find sunk cost?

Do you keep working and finish the construction, hoping that the market will soon improve? Or, do you stop work and save the money you would have spent finishing all the homes? At the point in time where you make this decision, everything you’ve spent so far is sunk cost.

How do you deal with sunk costs?

How to Make Better Decisions and Avoid Sunk Cost Fallacy

  1. Develop and remember your big picture. …
  2. Develop creative tension. …
  3. Keep track of your investments, be it time or money, and be ready to cut your losses when the numbers don’t look good. …
  4. Get the facts, not the hearsay. …
  5. Let go of personal attachments.

Is income a sunk cost?

In a business, the salary you pay your workers can be a sunk cost. You pay it without any expectation of having that money returned to you. Here are some other examples that illustrate sunk costs in business: A movie studio spends $50 million on making a movie and an additional $20 million on advertising.

What is the opposite of sunk cost?

The opposite of a sunk cost is a prospective cost, which is a sum of money due depending on future business or economic decisions. For instance, a successful business may take on prospective costs only if its decision-makers decide to expand, such as by building a new plant.

What are sunk costs chegg?

Sunk cost is a type of cost that has already been incurred in a business and is known to be unrecoverable. However, sunk costs should not be considered when making future decisions as it will lead to making inappropriate choices.

What is the difference between a sunk cost and an opportunity cost quizlet?

An opportunity cost is the benefit that is lost when rejecting some course of action. A sunk cost is a cost that has already been incurred and that cannot be changed by any future decision.

Which of the following statements describes sunk costs Select the best answer?

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.

What is an opportunity cost quizlet?

opportunity cost. the most desirable alternative given up as the result of a decision. thinking at the margin. the process of deciding whether to do or use one additional unit of some resource. cost/benefit analysis.

What is an opportunity cost example?

A student spends three hours and $20 at the movies the night before an exam. The opportunity cost is time spent studying and that money to spend on something else. A farmer chooses to plant wheat; the opportunity cost is planting a different crop, or an alternate use of the resources (land and farm equipment).

What is opportunity cost examples quizlet?

The cost of making a choice is that the next best alternative is forgone. This is know as opportunity cost. For example if a Government decides to make the choice of devoting more resources to the NHS then the opportunity cost is devoting those resources into the education system.