Which of the following is not considered a relevant concern in deter- mining incremental cash flows for a new product?
A) The use of factory floor space which is currently unused but available for production of any product.
B) Revenues from the existing product that would be lost as a result of some customers switching to the new product.
C) Shipping and installation costs associated with preparing the machine to be used to produce the new product.
D) The cost of a product analysis completed in the previous tax year and specific to the new product.
E) None of the above. (All are relevant concerns in estimating relevant cash flows attributable to a new-product project.)

Question

Quizplus · Accepted Answer

The cost of a product analysis completed in the previous tax year and specific to the new product is not considered a relevant concern in determining incremental cash flows for a new product as it is a sunk cost and cannot be recovered regardless of whether the new product is produced or not. The other options listed are all relevant concerns that would impact the incremental cash flows of a new product project.

Which of the Following Is Not Considered a Relevant Concern