Question

Which of the following is the best example of a sunk cost?

A) Future payments on a leased building.
B) Future research and development costs.
C) Historical research and development costs.
D) Historical noncash expenses.

Answer 1

The best example of a sunk cost is historical research and development costs. Sunk costs are costs that have been paid in the past and cannot be recovered.

Step-by-step explanation:

The best example of a sunk cost is option C) Historical research and development costs. Sunk costs are costs that have been paid in the past and cannot be recovered. In this case, the historical research and development costs have already been incurred and cannot be changed. When making decisions, it is important to ignore sunk costs and focus on future costs and benefits.