Answer:
The sunk costs of purchasing the machines is $3,400,000
Explanation:
The concept of sunk costs refer to costs that have been incurred by the entity which are not recoverable.
From the definition, it is clear since the machines have second-hand values,the portion of the costs not covered by the second-hand value is the sunk cost
Hence sunk costs could be derived by the formula below:
Sunk costs=Initial acquisition cost-Second-hand value
Initial acquisition costs=5*$1000000
Initial costs of acquisition =$5000000
Second-hand value=($500000*2)+($200000*3)
Second-hand value=$1600000
Sunk costs=$5000000-$1600000
Sunk costs=$3400000
