ACCA FM · Chapter 6 · Question 6 of 10
A company has spent $45,000 on market research to assess whether to launch a new product. In appraising the launch, how should this cost be treated?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: D) It should be excluded because it is a sunk cost
Explanation
Only future, incremental cash flows arising as a result of the decision are relevant. The market research has already been incurred and will not change whether or not the product is launched, so it is a sunk cost and is ignored in the appraisal.
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