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Q: A cost incurred in the past and that cannot be recovered in the future is called ______
  • A. economic cost
  • B. floating cost
  • C. sunk cost
  • D. prime cost
Correct Answer: Option C - A cost, that was incurred in past and which cannot be recovered in the future is known as sunk cost. Sunk cost sometimes also called as retrospective cost, refers to an investment already incurred that can't be recovered. Examples of sunk cost in business include costs incurred on marketing, research, new software installation etc. In business, the axiom that "one has to spend money to make money" is reflected in the phenomenon of the Sunk Cost. A sunk cost differs from future costs that a business may face such as decisions about inventory purchase costs or product pricing.
C. A cost, that was incurred in past and which cannot be recovered in the future is known as sunk cost. Sunk cost sometimes also called as retrospective cost, refers to an investment already incurred that can't be recovered. Examples of sunk cost in business include costs incurred on marketing, research, new software installation etc. In business, the axiom that "one has to spend money to make money" is reflected in the phenomenon of the Sunk Cost. A sunk cost differs from future costs that a business may face such as decisions about inventory purchase costs or product pricing.

Explanations:

A cost, that was incurred in past and which cannot be recovered in the future is known as sunk cost. Sunk cost sometimes also called as retrospective cost, refers to an investment already incurred that can't be recovered. Examples of sunk cost in business include costs incurred on marketing, research, new software installation etc. In business, the axiom that "one has to spend money to make money" is reflected in the phenomenon of the Sunk Cost. A sunk cost differs from future costs that a business may face such as decisions about inventory purchase costs or product pricing.