Question

Sales of a new product line may cause sales of existing lines to decline. In capital...

Sales of a new product line may cause sales of existing lines to decline. In capital budgeting, this is called a(n) _____________.

synergy cost

erosion cost

opportunity cost

irrelevant cost
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Answer #1

Option B is correct. Erosion Cost.

The sales of new product is enhanced at an expense of the existing product line i.e. the sales of exisitng product line is sacrified or is decreased to increased the sales of new product. This concept is known as Erosion Cost in capital budgeting.

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