US CMA Part 2 · Chapter 6 · Question 1 of 22
Ashby Printing paid $45,000 last year for a feasibility study on a new product line. In deciding now whether to launch the line, how should the $45,000 be treated?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: A) Ignored, because it is a sunk cost that cannot be changed by the decision
Explanation
A sunk cost has already been incurred and will not differ between alternatives, so it is irrelevant to the decision. Only future costs and revenues that differ between alternatives (relevant or incremental amounts) should be considered.
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