question archive Valley Forge and Metal purchased a truck five years ago for local deliveries
Valley Forge and Metal purchased a truck five years ago for local deliveries
Subject:FinancePrice:2.87 Bought7
Valley Forge and Metal purchased a truck five years ago for local deliveries. Which one of the following costs related to this truck is the best example of a sunk cost? Assume the truck has a usable life of eight years.
New tires that will be purchased this winter
Costs of repairs needed so the truck can pass inspection next month
Money spent last month repairing a damaged front fender
Engine tune-up that is scheduled for this afternoon
Cost for a truck driver for the remainder of the truck's useful life
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Answer:
"Money spent last month repairing a damaged front fender" is the best example of Sunk Cost.
Sunk cost means the cost that has been already incurred in the past and cannot be recovered. This implies that sunk costs should be no be cosidered in future decision making of the project, because these are the cost that can not be changed with under taking the project or not.
