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Hi john,
This one is confusing me a little.
An accountant is paid $30,000 pa and spends 2 weeks one month working on appraising project Alpha.
Why should the accountant NOT charge half his salary to the project?
A. Because his salary is sunk
b. Because his salary is not incremental.Answer is B, which I understand. However why isn’t it A as well? I thought sunk costs should be ignored?
Many thanks
Sunk costs should be ignored. But they are amounts that have already been spent. The accountant will not have been paid all his salary yet! 🙂
Hi john just to go back to this, is the salary a committed cost then? Either way, (sunk or committed) it wouldn’t be charged to the project?
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