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Company wants to put out a new line of shirts. What shouldn't they include in their analysis? 1....

Question:

Company wants to put out a new line of shirts. What shouldn't they include in their analysis?

1. any expected changes in the sales levels of current shirts caused by adding the new product line.

2. increased taxes from shirt profits

3. the expected revenue from shirt sales

4. cost of new display for the additional shirts

5. R&D costs to produce the current shirt samples

Sunk Costs:

In economics, sunk costs refers to expenses that have been incurred in the past and cannot be recovered in the future. When making decisions, sunk costs should not be factor into the decisions.

Answer and Explanation: 1

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The answer is 5.

The analysis should only include marginal costs, i.e., expenses that are incremental due to the introduction of the new line, and...

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Sunk Costs: Definition & Examples

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Chapter 31 / Lesson 8
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Sunk costs refer to incurred costs that can no longer be recovered. Learn more about the definition of sunk costs and explore examples of sunk costs in businesses.


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