Suppose that you close down your coffee shop and sell your coffee maker for $500. If you originally bought the coffee maker for $4,000 and it lost $1,000 because of depreciation (i.e., age and use), the sunk cost of the coffee maker is:
A. $3, 500.
A sunk cost is defined as the cost that has been incurred by the firm and cannot be recovered. A sunk cost is not considered while making future business decisions.
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fromChapter 31 / Lesson 8
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.