Which of the following would be considered a sunk cost?
A) purchase price of new equipment
B) equipment rental for the production area
C) net book value of equipment that has no market value
D) warehouse lease expense

Question

Quizplus · Accepted Answer

The net book value of equipment that has no market value is a sunk cost because the expenditure has already been made and cannot be recovered. The purchase price of new equipment (A) and equipment rental for the production area (B) are not sunk costs because they are ongoing expenses that can be avoided in the future. The warehouse lease expense (D) may or may not be a sunk cost depending on the specific circumstances, such as whether the lease can be terminated early or if the business has the option to sublet the space.

Which of the Following Would Be Considered a Sunk Cost