ICAEW BIP · Chapter 12 · Question 4 of 7
Market research costing £12,000 has already been carried out and paid for in connection with a possible new product. In deciding whether to launch the product, how should the £12,000 be treated?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: B) Ignored, because it is a sunk cost
Explanation
A sunk cost has already been incurred and cannot be changed by any future decision, so it is not relevant to the launch decision. Only future, incremental cash flows that differ between the alternatives are relevant.
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