The Shoe Box is considering adding a new line of winter footwear to its product line-up. Which of the following are relevant cash flows for this project? I. decreased revenue from products currently being offered if this new footwear is added to the lineup
II) revenue from the new line of footwear
III) money spent to date looking for a new product line to add to the store's offerings
IV) cost of new counters to display the new line of footwear

Question

Quizplus · Accepted Answer

I. decreased revenue from products currently being offered if this new footwear is added to the lineup- This is a relevant cash flow as adding a new line of products may cannibalize sales of existing products and lead to decreased revenue.

II) revenue from the new line of footwear - This is a relevant cash flow as revenue from the new line of footwear will be a source of cash inflow.

III) money spent to date looking for a new product line to add to the store's offerings - This is not a relevant cash flow as it is a sunk cost and cannot be recovered.

IV) cost of new counters to display the new line of footwear - This is a relevant cash flow as it is an outflow required to launch the new line of footwear.

The Shoe Box Is Considering Adding a New Line of Winter