Richard Co. incurred research and development costs in 2011 as follows: Equipment acquired for...

Question:

Richard Co. incurred research and development costs in 2011 as follows:

Equipment acquired for use in various research and development projects $500,000
Depreciation on the above equipment$67,500
Materials used$100,000
Compensation costs of personnel$250,000
Outside consulting fees$75,000
Indirect costs appropriately allocated$125,000

The total research and development costs in Richard's 2011 income statement should be:

A. $425,000

B. $542,500

C. $617,500

D. $925,000

Sunk Cost:

Sunk cost can be defined as the expense which is incurred due at the beginning which is not recoverable. The expense incurred by a company on research and development is an example of sunk cost.

Answer and Explanation: 1

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Data:

Equipment acquired for use in various R&D projects = $500,000

Depreciation on the above equipment = $67,500

Materials used = $100,000

Co...

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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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