Practice prompt · Q:economics-and-market-foundations/sunk-cost-current-choice-001

Exclude a sunk amount without erasing history

Check whether the learner removes an unchanged past payment from a forward looking comparison while retaining its reporting and accountability roles.

Updated Aug 7, 2026 Review due Nov 7, 2026

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A company paid a nonrefundable $60,000 development fee. From today, continuing requires $85,000 and is expected to produce $70,000 of benefit; stopping avoids both future amounts. Which treatment of the past payment is correct?

Choose the best answer. a Continue because stopping would waste the $60,000 already paid. b Exclude the $60,000 from the incremental choice, compare future consequences, and retain the payment for reporting, impairment, governance, and process review as applicable. c Delete the $60,000 from every record because sunk costs never matter for any purpose.

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Answer: b

Choice b. The payment contributes zero to the difference between current alternatives but can remain important for recognition, measurement, accountability, and learning.