An entity is considering the introduction of a new product called the Katana int
ID: 2538023 • Letter: A
Question
An entity is considering the introduction of a new product called the Katana into a market where it presently sells its signature product, the Sabre. There are no plans to eliminate the Sabre from the company’s line of products. The cost of test marketing the Katana was $153254. Selling the Katana in the same market as the Sabre is expected to lead to a reduction of net revenue of $114707 from the decline of Sabre sales. The project will also be allocated $92848 of corporate overhead. What is the opportunity cost related to the launch of the new product?
Explanation / Answer
The opportunity cost related to launch of new product is the loss of revenue due to decline in sales of Product-Sabre.
The opportunity cost of lauch of new product is $ 114,707.