Question

Quantitative Labs is relaunching a modified version of a product that failed to reach market in...

Quantitative Labs is relaunching a modified version of a product that failed to reach market in the first attempt. Which of the following should not be included in the capital budgeting analysis?

R&D investment in the development of the original product

Marketing study expenses for the first attempt

All in this list should not be included

Costs incurred in training the sales force to sell the original version of the product
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Answer #1

Answer-

The correct Option is the second one. Marketing study expenses for the first attempt.

The Option Marketing study expenses for the first attempt is the sunk cost and is a one time expense that do not continue for the life of the project and therefore should not be included in the capital budgeting analysis.

The other otptions for Quantitative Labs like R&D investment in the development of the original product and Costs incurred in training the sales force to sell the original version of the product are expenses that should be included in the capital budgeting analysis of the project.

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