Which of the following is not a sunk cost?Group of answer choicesThe non-refundable deposit already paid to secure a new factoryThe tax a firm needs to pay given it sold one of its propertiesTime spent by senior management at an upcoming corporate retreatAn advertising campaign from last year
Question
Which of the following is not a sunk cost?Group of answer choicesThe non-refundable deposit already paid to secure a new factoryThe tax a firm needs to pay given it sold one of its propertiesTime spent by senior management at an upcoming corporate retreatAn advertising campaign from last year
Solution
The tax a firm needs to pay given it sold one of its properties is not a sunk cost.
Here's why:
-
A sunk cost is a cost that has already been incurred and cannot be recovered.
-
The non-refundable deposit already paid to secure a new factory is a sunk cost because it has already been paid and cannot be recovered.
-
Time spent by senior management at an upcoming corporate retreat is a sunk cost because it represents time that could have been used elsewhere, and once it's spent, it can't be recovered.
-
An advertising campaign from last year is a sunk cost because the money spent on the campaign has already been spent and cannot be recovered.
-
However, the tax a firm needs to pay given it sold one of its properties is not a sunk cost. This is a future cost that can be avoided if the firm decides not to sell the property. Therefore, it does not meet the definition of a sunk cost.
Similar Questions
1. LO 10.1________ are the costs associated with not choosing the other alternative.Sunk costsOpportunity costsDifferential costsAvoidable costs
Which of the following is an example of an implicit cost?Group of answer choicesInterest paid on the firm's debtRent paid by the firm to lease office spaceThe owner of a firm forgoing an opportunity to earn a large salary working for a Wall Street brokerage firmWages paid to workers
The costs incurred due to a ______________ between stockholders and management are called agency costs.Multiple choice question.conflict of sunk costsconflict of interestconflict of hidden agendasconflict of opportunity costs
Which of these is not an expense type item?Group of answer choicesBank chargesCost of salesDividends paid to shareholdersDepreciation
Which statement correctly describes a direct cost?
Upgrade your grade with Knowee
Get personalized homework help. Review tough concepts in more detail, or go deeper into your topic by exploring other relevant questions.