The Enger Company is contemplating replacing some old equipment. The pertinent information is as follows:
-Which of the data provided in the table is a sunk cost?
A) The annual cash operating costs of the old equipment
B) The annual cash operating costs of the replacement equipment
C) The disposal value of the old equipment
D) The original cost of the old equipment

Question

The Enger Company is contemplating replacing some old equipment. The pertinent information is as follows: 
-Which of the data provided in the table is a sunk cost?
A) The annual cash operating costs of the old equipment 
B) The annual cash operating costs of the replacement equipment 
C) The disposal value of the old equipment 
D) The original cost of the old equipment

Quizplus · Accepted Answer

A sunk cost is a cost that has already been incurred and cannot be recovered. The original cost of the old equipment is a sunk cost because it has already been incurred and cannot be recovered. The other options are not sunk costs because they relate to future costs or potential revenue.

The Enger Company Is Contemplating Replacing Some Old Equipment