A decrease in the sales of a current project because of the launching of a new project is:
A)cannibalization.
B)a sunk cost.
C)an overhead expense.
D)irrelevant to the investment decision.

Question

Quizplus · Accepted Answer

Cannibalization occurs when sales of an existing product decrease due to the launch of a new product within the same company, resulting in the new product "eating" into the sales of the existing product. This is a relevant consideration for the investment decision, as it may impact the overall profitability of the company. Sunk costs are costs that have already been incurred and cannot be recovered, overhead expenses are ongoing expenses required to run a business, and a decrease in sales is not irrelevant to the investment decision as it may impact the overall financial performance of the company.

A Decrease in the Sales of a Current Project Because