Asked by Juliana Quintero on Jul 20, 2024
Verified
Which one of the following is an erosion cost?
A) the $200 you spent last week to repair a TV which you are selling today
B) a $200 increase in the cost of a new computer because technology has improved
C) the $200 reduction in hot dog sales because you are now also selling hamburgers
D) the $200 cost of a used printer which now sits idle in your closet
E) a $200 bill incurred to upgrade your computer software
Erosion Cost
Costs that occur when the introduction of a new project or product negatively impacts the sales and profits of existing products.
Upgrade
The process of replacing a product with a newer version or installing a newer version of software to improve functionality or performance.
Repair
The action of fixing or restoring something that is broken or damaged back to its original condition.
- Interpret and distinguish the costs related to erosion when considering new initiatives.
Verified Answer
LW
Lemar WhiteJul 21, 2024
Final Answer :
C
Explanation :
Erosion cost refers to the reduction in cash flows resulting from a new project or decision. In this case, option C represents an erosion cost because the introduction of hamburgers has reduced the sales of hot dogs, thereby decreasing the cash flows from hot dog sales.
Learning Objectives
- Interpret and distinguish the costs related to erosion when considering new initiatives.