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.