Mark is an engineer who has designed a telecommunications device. He is convinced that there is a big potential market for the device. Accordingly, he has decided to quit his present job and start a company to manufacture and market the device.
-Mark purchased a machine two years ago to make experimental boards.The machine will be used to manufacture the new board.The cost of this machine is:
A) an opportunity cost
B) a sunk cost
C) a differential cost
D) a period cost

Question

Quizplus · Accepted Answer

The cost of the machine is a sunk cost because it was purchased in the past and its cost cannot be recovered. It is not an opportunity cost because there are no alternative uses for the machine, it is not a differential cost because it is not a cost that differs between alternatives, and it is not a period cost since it is not related to a specific period of time.

Mark Is an Engineer Who Has Designed a Telecommunications Device