Question

Research & Development (R&D) expenditures can be considered _______ costs.

Group of answer choices

long-term

sunk

fixed

variable

Answer 1

The correct answer is Sunk cost

Reaserch & development expenditure can be consider sunk costs.

Sunk costs are those costs which once incurred cannot be recovered. Expenditure incurred on Research & Development is for producing a finished product. Once the product is completed it will be sold in the market at price decided by the company. As the research & development costs are already incurred they will have no influence while deciding the prices for the finished product. These costs will be irrelevant for decision making purpose as they have been already incurred and cannot be recovered.