Which term describes unrecoverable costs incurred from past decisions?

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Multiple Choice

Which term describes unrecoverable costs incurred from past decisions?

Sunk costs are unrecoverable costs from past decisions. Because they can’t be recovered no matter what you do now, they shouldn’t influence current or future choices; focus instead on future costs and benefits and on the incremental impact of your decisions. For example, money already spent on a project should not drive whether you continue it—you compare future cash flows and the additional costs of continuing versus stopping. Other terms describe different ideas: opportunity costs are the foregone benefits of the next best alternative, incremental costs are the additional costs caused by a specific decision, and book costs are accounting values that may not reflect future cash flows.

Sunk costs are unrecoverable costs from past decisions. Because they can’t be recovered no matter what you do now, they shouldn’t influence current or future choices; focus instead on future costs and benefits and on the incremental impact of your decisions. For example, money already spent on a project should not drive whether you continue it—you compare future cash flows and the additional costs of continuing versus stopping. Other terms describe different ideas: opportunity costs are the foregone benefits of the next best alternative, incremental costs are the additional costs caused by a specific decision, and book costs are accounting values that may not reflect future cash flows.

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