Question

Consider the business Dave’s Doughnuts. Which of the following is a sunk cost of this business? Group of answer choices The monthly rent Dave must pay to use a building downtown The wages Dave pays to his workers who make the doughnuts The expenses that went into research and development of a new doughnut flavor The salary that Dave could be earning elsewhere if he didn’t own the business None of the above

Answer 1

Answer:

The expenses that went into research and development of a new doughnut flavor

Explanation:

A sunk cost is a cost that has already been incurred and cannot be recovered. It is money that has already been spent. Sunk costs are bygone and are not to be considered when deciding whether to continue an investment project.

The expenses that went into research and development of a new doughnut flavor is a sunk cost since the cost has been incurred already and cannot be recovered because it is not a relevant cost.