General Mills Just Is Undertaking an Analysis on a New

question 55

Multiple Choice

General Mills just is undertaking an analysis on a new cereal. The firm realizes that if they come out with a new product it would affect sales of existing products? What is the best course of action for General Mills in this analysis?

• A) Treat the reduction of sales from existing cereals as a sunk cost.
• B) Account for the reduction of sales from existing cereals in the projection of cash flows on the new product.
• C) Include the allocated costs of the new cereal in the sales of the pre-existing products.
• D) Ignore the fact that sales of other products will be affected.

---

Definitions:

UCC

Stands for the Uniform Commercial Code, a comprehensive set of laws governing all commercial transactions in the United States.

Transfer

The act of moving or passing from one person, place, or situation to another, often referring to the ownership or title of property or assets.

Checks

Financial instruments that order a bank to pay a specific amount of money from the writer’s account to the person or entity in whose name the check has been issued.

Depositary Bank

The first bank that receives a check for payment.