Fern's Florist is considering the purchase of a new delivery van since its old van has required numerous repairs. Last year, the old van required an engine overhaul with a cost of $5,000. This year, it is anticipated that the old van will require additional repairs with an estimated cost of $2,500. Fern can purchase a new van for $35,000 or the business can lease a new van with a down-payment of $3,900 and monthly lease payments of $320. Which of the cost presented in this decision would be considered a sunk cost?
A) Engine overhaul of $5,000 last year
B) Anticipated repairs for old van of $2,500
C) New van purchase of $35,000
D) Lease down-payment of $3,900

Question

Quizplus · Accepted Answer

The cost that represents a sunk cost is the engine overhaul of $5,000 that was incurred last year, since it happened in the past and can't be undone.

Fern's Florist Is Considering the Purchase of a New Delivery