Final answer:
The cost of maintaining the old machine is the sunk cost since it's a past expense that won't affect future decisions. Other listed costs like the purchase of the new machine, its disposal, and training for new equipment are future costs impacting future decisions.
Therefore, option 1 is correct.
Step-by-step explanation:
In the context of replacing an old machine with a new one, a sunk cost refers to money that has already been spent and cannot be recovered. In the choices provided, the cost of maintaining the old machine is considered a sunk cost because it is an expense that has already occurred and will not affect future decisions about the new machine. The purchase of the new machine, disposal of the old machine, and training of employees are all future costs that will be incurred as a result of the decision to replace the machine. These are not sunk costs since they have implications for the company's future operations and finances.
Dealing with sunk costs can be challenging for businesses. The key lesson is to disregard these costs when making decisions, as they should be based on future events and potential gains, not past expenditures that cannot be changed. By ignoring sunk costs, companies can make strategic decisions that are more financially sound and reflective of current economic circumstances, such as the balance between capital and labor following a change in technology costs.