PRC-3 · Chapter 4 · Question 14 of 65
A piece of machinery costs a company Rs. 1 million. After deciding to close that factory entirely, they find they cannot return or resell the machinery. In management decision-making regarding future projects, this Rs. 1 million is a:
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: A) Sunk cost
Explanation
A sunk cost is a cost that has already been incurred and cannot be recovered. Therefore, it is irrelevant for future decision-making.
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