Q403
Book value of existing equipment is a historical cost and not necessary for deciding equipment replacement, thus it can be considered as
A.
operating cost
B.
sunk cost
AnswerC.
in-house cost
D.
out-house cost
Answer: Option B
Solution
Answer: Option B
Solution:
Book value of existing equipment is a historical cost and not necessary for deciding equipment replacement, thus it can be considered as sunk cost. A sunk cost is a cost that an entity has incurred, and which it can no longer recover.