CA Inter P4 · Chapter 1 · Question 4 of 8
A cost that has already been incurred and cannot be recovered by any future decision is known as a:
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: A) Sunk cost
Explanation
A sunk cost is a historical cost that has been incurred and cannot be changed by any present or future decision, so it is irrelevant for decision making. Opportunity cost is the benefit forgone from the next best alternative, imputed cost is a notional cost not involving cash outlay, and out-of-pocket cost involves a current cash payment.
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