Question

Ma’s Cookie Company has a very popular brand “Chip Munk.” They are considering to introduce another brand named: “Missy Crumbs.” Market research showed that Missy Crumbs brand is going to take away $300,000 worth of sales from Chip Munk brand. Further research revealed that it is common practice for competing cookie companies to introduce new brands to compete with each other. Would you consider $300,000 loss of revenue for Chip Munk as a relevant cost consideration for the proposed brand Missy Crumbs?

Answer 1

The company should consider it as relevant cost consideration of $300,000 because the company is going to introduce new brand which is going to produce additional sales which will add to the profit of the company and this will help the company to diversify the brand reducing the dependence on a single brand.