Bhakta Group has spent $265,000 on research developing a new type of security system. For this system to now be manufactured, the firm will need to expand into an empty building that it currently owns. The firm was offered $442,000 last week for that building, but it has not responded to the offer yet. An additional $538,000 will be required for new equipment and building improvements. Labor and material costs are estimated at $85.20 per system. Interest expense on the loan needed to finance the production of this new system will be $22,000 a year. Which one of the following correctly identifies the sunk costs?

Multiple Choice

A) $442,000 for the building plus $265,000 for research

B) $442,000 value of the building

C) $22,000 for interest plus $265,000 for research

D) $442,000 value of the building plus $538,000 for new equipment and improvements

E) $265,000 for research