Question

AJ plans to attend a retreat on mindfulness. He paid a $500 nonrefundable registration fee, made a reservation at a hotel that costs $200, and budgeted $150 for gas and food. Two days before the retreat, he becomes ill. Assuming he is able to cancel the hotel without penalty, AJ's sunk cost equals:

Answer 1

$500

Step-by-step explanation:

Sunk costs refer to money that is already spent and cannot be recovered whatever you do.

In this case, AJ was able to cancel the hotel reservation without any penalty (cost = $0) and didn't any gas yet (cost = $0), but the $500 registration fee is nonrefundable which means that AJ cannot recover the money.