Solar Confectionary develops a new candy bar and plans to sell each bar for $1.Solar 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 million candy bars will be sold,but lowers the estimate of incremental revenue to $700,000.What would explain this change?

Question

Quizplus · Accepted Answer

The senior executive may have taken into consideration the possibility of the new candy bar cannibalizing sales of 300,000 of Solar Confectionary's other candy bars, resulting in lower incremental revenues of $700,000 instead of $1 million.

Solar Confectionary Develops a New Candy Bar and Plans to Sell