Certification of Capability in Business Analysis (CCBA) — Question 68

An organization has invested $750,000 into a technology to help secure, automate, and communicate customer ordering. The solution has worked well for the past six months, but a newer technology has been developed that surpasses the abilities of the current solution and solves many defects and issues the company has with the existing solution. Purchasing the newer solution, however, means that the company will have to discard the solution that's only been in place for the past six months. What term can be assigned to the monies already implemented into the existing solution?

Answer options

• A. Opportunity cost
• B. Cost of nonconformance
• C. Sunk costs
• D. Cost-benefits

Correct answer: C

Explanation

The correct answer is 'C. Sunk costs' because it refers to money that has already been spent and cannot be recovered. The other options do not fit this scenario; 'A. Opportunity cost' relates to potential benefits lost when choosing one option over another, 'B. Cost of nonconformance' refers to costs incurred due to not meeting quality standards, and 'D. Cost-benefits' compares the costs and advantages of different choices.