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Cain Supplies paid $3,842 in production costs during a period when it produced 4,000 units. Which...

Cain Supplies paid $3,842 in production costs during a period when it produced 4,000 units. Which of the following is the most correct label for the $3,842 amount?

Group of answer choices

Opportunity cost

Fixed cost

Variable cost

Sunk cost

Period cost

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Answer #1

Answer: Sunk cost.

Explanation:

Sunk costs are the cost which already incurred and are unrecoverable in nature. In the given question, Cain Supplies already paid $3,842 in production costs during a period. Thus in the absence of any other information about the cost breakup, the most suitable classification for the amount is of a sunk cost.

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