20.3.2. Sunk Cost

Try these first

1. 1.

   Define sunk cost.

   Hint

   Think about costs related to past expenses that you cannot get back.

2. 2.

   Give an example of a sunk cost.

   Hint

   Consider expenses that cannot be refunded.

3. 3.

   What are sunk costs?

   • Recoverable costs
   • Lost future benefits
   • Costs that cannot be recovered

   Hint

   Think about expenses that can't be refunded.

4. 4.

   True or False: Sunk costs should influence current decision-making.

   • True
   • False

   Hint

   Focus on what's recoverable for future choices.

5. 5.

   You have invested $15,000 in a startup that is losing money each month. Assess the importance of recognizing the sunk cost in deciding whether to continue investing or shut down the startup.

   Hint

   Focus on the startup's future earning potential rather than the past loss.

6. 6.

   A company decides to continue production of a popular product even though market trends show a decline in demand. They reference the heavy advertising costs already incurred. Analyze the decision considering sunk costs.

   Hint

   Consider potential future income instead of past investment.