Question

Which of the following statements reflects why sunk costs are irrelevant? (Check all that apply.) The statement is not true – some sunk costs are relevant. Some costs have been committed to, and therefore are unavoidable. Some costs have been incurred already, and therefore do not change across alternatives in some current or future decision. Some costs change depending on how many units are purchased or manufactured.

Answer 1

Answer:

Some costs have been incurred already, and therefore do not change across alternatives in some current or future decision.

Explanation:

Sunk costs are costs that have already been incurred by a business and cannot be recovered. For this reason, they are irrelevant to current and future business decisions.

For example, an organization purchases a piece of equipment for $10,000 and discovers that additional parts need to be purchased for $1,000. The $10,000 is a sunk cost because it cannot be recovered.