Question

A delivery company spent $3,500 last week upgrading one of its trucks. This week the company is trying to decide if this upgraded truck could be better utilized if they assigned it a proposed project. When analyzing the proposed project, the $3,500 should be treated as which type of cost?

Answer 1

Answer:

Sunk cost

Explanation:

The sunken cost is the expense previously incurred that will not be compensated in future. Plus, it's also called past expense.  

The cost at the time of decision-making is not significant and it should be ignored.

In the given question, the $3,500 spent which is not now recovered and hence represents the sunk cost