At the beginning of the year, Gizmo Inc. is considering whether to repair and retain an existing machine, or to replace it with a new machine. The following information is available to analyze this decision: Which of the costs being considered for this decision represents a sunk cost?
A) $6,000 of Machine overhaul costs (last year)
B) $3,000 of repair costs (current year)
C) $14,000 of annual operating costs (existing machine)
D) $10,000 of annual operating costs (new machine)

Question

At the beginning of the year, Gizmo Inc. is considering whether to repair and retain an existing machine, or to replace it with a new machine. The following information is available to analyze this decision:  Which of the costs being considered for this decision represents a sunk cost?
A) $6,000 of Machine overhaul costs (last year) 
B) $3,000 of repair costs (current year) 
C) $14,000 of annual operating costs (existing machine) 
D) $10,000 of annual operating costs (new machine)

Quizplus · Accepted Answer

The Answer is A

At the Beginning of the Year, Gizmo Inc