A classic movie about the end of the world showed a floating island on what was the Pacific Ocean. In the middle of the movie fi
lming, the set sank in a hurricane. The producers who had already spent $70 million on the set were faced with a new cost of $50 million to rebuild the set. Expected additional costs continued to be $100 million. The expected revenues were $160 million. Should they have rebuilt the set and finished the movie?a. Yes. The set sank. What is it about sunk costs that you do not understand?b. No. The loss on the movie was $160 million minus $220 million, a loss of $60,000c. One cannot tell. They may have though that revenues would be higherd. One cannot tell. They may have thought that costs from that point on might have been lower
Answer: Cannot have a correct answer if you don´t have the exact costs/revenues.
Explanation: Cinematographic business has always been one of the less clear investment in terms of revenues.
You can have a defaukt budget, a well marked limit with no possibilities of increasing it. Spending less depends on the agreements with production and direction.
But, revenues are different. You can make a calculation, but in the end only time and viewers will decide if the movie was affordable.
