Acompany invested $400,000 in a technology that reduced the overall costs of production by reducing their cost per unit from $2 to $1.85. later, a manager has an opportunity to outsource production to another company at a cost per unit of $1.75. if you are the from $2 to should consider the $400,000 as a sunk cost, not relevant to the decision. o b should reduce his effort by ignoring any new developments and letting the production run as it is. o c. should ignore the $400,000 fixed cost. o d. both a & c

Option D, Both A & C

Explanation:

A company invested $400,000 in a technology that reduced the overall costs of production by reducing their cost per unit from $2 to $1.85 . Later, a manager has an opportunity to outsource production to another company at a cost per unit of $1.75 . If you are the manager, you should consider the $400,000 as a sunk cost, not relevant to the decision and should ignore the $400,000 fixed cost.

Sunk cost is the cost which is already incurred in past and does not have any significance in decision making.

A sunk cost is already incurred in the fields of economy and business decision-making and can not be recovered. Sunk costs are contrasted with future costs, which can be avoided if measures are taken.

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