Fundamentals of Cost Accounting 3rd Edition by William N. Lanen, Shannon W. Anderson, Michael Maher

Exercise 18

Consider the In-Action item, referred to in Question 4-17 (page 111). Suppose the company had signed a lease for five years and had two years remaining on the contract. Would the remaining lease payments be relevant to the decision to move? Explain why or why not.

Step 1 of 4

Sunk costs:

A cost that had already been incurred by the organization and irrecoverable in future is called a sunk cost. Sunk cost is different from the future cost that may be incurred by the business, for example decision related to the price of product or purchase of inventory.