12) Taste Good Chocolates develops a new candy bar and plans to sell each bar fo
ID: 2678642 • Letter: 1
Question
12) Taste Good Chocolates develops a new candy bar and plans to sell each bar for $1.Taste Good predicts that 1 million candy bars will be sold in the first year if the new
candy bar is produced and sold, and includes $1 million of incremental revenues in
its capital budgeting analysis. A senior executive in the company believes that 1 mil-
lion candy bars will be sold, but lowers the estimate of incremental revenue to
$700,000. What would explain this change?
a. excessive marketing costs to sell the 1 million candy bars
b. a lower discount rate
c. cannibalization of 300,000 of Taste Good Chocolates
Explanation / Answer
Taste Good Chocolates develops a new candy bar and plans to sell each for $1. Taste good chocolates predicts that 1 million candy bars will be sold in the first year if the new candy bar is produced and sold and includes $1 million of incremental revenues in the capital budgeting analysis. A senior executive in the company believe that 1 million candy bars will be sold but lowers the estimate of incremental revenue to $700,000. What would explain this change?
A. Excessive marketing costs to sell the 1 million bars
b. a lower discount rate
c. cannibalization of 300,000 of taste good chocolates other candy bars
d. a higher selling price for the new candy bars
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