Explanation
Sunk costs are the costs that have already been incurred and cannot be recovered or changed. They are irrelevant for future decisions, as they do not affect the potential benefits or outcomes of the alternatives. In this case, the $750,000 invested into the existing technology is a sunk cost, as it cannot be refunded or reused.
The organization should not consider this cost when deciding whether to purchase the newer solution or not. Instead, the organization should compare the expected costs and benefits of the newer solution with the current solution, and choose the option that maximizes the value for the organization12 Option A is incorrect because opportunity cost is the value of the next best alternative that is forgone as a result of making a decision. It is the benefit that could have been gained by choosing a different option. In this case, the opportunity cost of purchasing the newer solution is the value of keeping the existing solution, and vice versa. The opportunity cost is relevant for future decisions, as it affects the potential benefits or outcomes of the alternatives3 Option B is incorrect because cost of nonconformance is the cost incurred due to poor quality or deviation from the standards or requirements. It includes the costs of rework, defects, waste, scrap, warranty, customer dissatisfaction, and lost reputation. In this case, the cost of nonconformance is the cost associated with the defects and issues of the existing solution, and the potential cost of not meeting the customer expectations or needs. The cost of nonconformance is relevant for future decisions, as it affects the potential benefits or outcomes of the alternatives4 Option D is incorrect because cost-benefits is the comparison of the costs and benefits of a decision or an action. It is a technique used to evaluate the feasibility, desirability, and value of a solution or an alternative. In this case, the cost-benefits of purchasing the newer solution is the comparison of the expected costs and benefits of the newer solution with the current solution. The cost-benefits is relevant for future decisions, as it affects the potential benefits or outcomes of the alternatives5 References:
Business Analysis Techniques - ECBA, CCBA, CBAP Endorsed, Section 8.5: Cost-Benefit Analysis CCBA Certification Cost Details | Techcanvass - Business Analysis Blog A Comprehensive Guide to CCBA Certification - Business Analysis Blog Business Analysis Body of Knowledge (BABOK® Guide), Section 10.23: Decision Analysis, 10.23.3.2:
Sunk Costs
Business Analysis Body of Knowledge (BABOK® Guide), Section 10.23: Decision Analysis, 10.23.3.1:
Opportunity