Is depreciation a sunk cost?
Understand the Problem
The question is asking whether depreciation, which refers to the reduction in the value of an asset over time, is considered a sunk cost. A sunk cost is a financial cost that has already been incurred and cannot be recovered. The question invites an explanation of the relationship between depreciation and sunk costs.
Answer
Depreciation is a sunk cost.
Depreciation is a sunk cost.
Answer for screen readers
Depreciation is a sunk cost.
More Information
Depreciation is classified as a sunk cost because it represents a non-recoverable expense that has already been incurred and cannot be changed by future actions.
Tips
Common mistakes include confusing depreciation with costs that can be recovered or avoided. Sunk costs are not to be considered in decision-making processes about future expenditures.
Sources
- What Is a Sunk Cost—and the Sunk Cost Fallacy? - Investopedia - investopedia.com
- What are sunk costs in accounting? - Simplestudies.com - simplestudies.com
- Sunk Cost: Fallacy, Meaning, Example - 5paisa - 5paisa.com
Thank you for voting!
