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Harry Haney manager of the Eastern Division of Mertock Co made the following comment to the manager of the central division It is all well and good for you to say that i should disregard sunk cost

Harry Haney manager of the Eastern Division of Mertock Co. made the following comment to the manager of the central division:

It is all well and good for you to say that i should disregard sunk cost when I consider whether to replace the old,inefficient equipment with new, more efficient equipment. But my performance evaluation is based on net operating profits divided by total assets. The new equipment will increase my total asset base and lower the ratio of profits to assets, hurting my performance. Thus I will not sell the old equipment.

Do you agree with Haneys' statement? Why or why not?

Jun 22 2020 View more View Less

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