Question

After purchasing a coffee cup from your local gas station for $5.00, you can always refill your cup for $0.50. The sunk cost of the coffee purchased at the gas station is___________

Answer 1

$4.50

Step-by-step explanation:

The sunk cost is the cost that has been incurred and is unrecoverable in the process of taking a financing decision.

If the cost of a coffee cup from a local gas station cost $5.00 and the cost of refill is $0.50, the coffee is the actual element needed and from the refill, it can be estimated that it costs $0.50.

Hence the sunk or unrecoverable cost is the difference between the coffee cup and the refill cost

= $5.00 - $0.50

= $4.50