sales = 950,000, variable costs = 450,000, and fixed costs = 310,000. if an addition is offered to a company which is estimated by the sales manager to increase sales by a maximum of $750,000, and the company’s accountants have determined that the proposed addition will add $320,000 to fixed costs each year and variable costs are expected to be at the same percentage as they currently are before the proposed addition, why is the current fixed costs of 310,000 a sunk cost while the addition's fixed cost of 320,000 is an out-of-pocket cost?

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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sales = 950,000, variable costs = 450,000, and fixed costs = 310,000. if an addition is offered to a company which is estimated by the sales manager to increase sales by a maximum of $750,000, and the company’s accountants have determined that the proposed addition will add $320,000 to fixed costs each year and variable costs are expected to be at the same percentage as they currently are before the proposed addition, why is the current fixed costs of 310,000 a sunk cost while the addition's fixed cost of 320,000 is an out-of-pocket cost?

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