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Hi-Tech Inc. has several outdated computers that cost a total of $17,800 and could be sold as scrap for $4,600. They could be updated for an additional $2,400 and sold. If Hi-Tech updates the computers and sells them, net income will increase by $9,000.
-What amount would be considered sunk costs?
A) $2,400
B) $9,000
C) $17,800
D) $20,200

Question

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Hi-Tech Inc. has several outdated computers that cost a total of $17,800 and could be sold as scrap for $4,600. They could be updated for an additional $2,400 and sold. If Hi-Tech updates the computers and sells them, net income will increase by $9,000.
-What amount would be considered sunk costs?
A) $2,400
B) $9,000
C) $17,800
D) $20,200

Quizplus · Accepted Answer

Sunk costs are costs that have already been incurred and cannot be recovered. In this scenario, the $17,800 spent on the outdated computers is a sunk cost because it has already been spent regardless of the decision to update or sell the computers as scrap.

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