Question

In: Accounting

In introducing a new product: What type of cost should a business consider? What type of...

In introducing a new product:

What type of cost should a business consider?

What type of cost should a business ignore?

What are some qualitative decisions a business should consider before introducing a new product?

Solutions

Expert Solution

In introducing new product type of cost to be considered is variable i.e. packaging, shipping, marketing, as well as any fees related to legal advice, licensing, any cost for retail or wholesale permits and all other operating costs.

Type of cost business should ignore are fixed cost and sunk cost. Fixed cost which remains same whether new product introduced or not such as rent, property taxes etc. Sunk cost are cost which already has been incurred such as research and development cost.

Some qualitative decisions a business should consider before introducing a new product are:-

Maketing Research - It identifies maket needs and wants, product features, pricing, decisions makers, distribution channels etc.

Testing- test market the new product to be sure it has features the customer wants.

Training- employees and distribution channels need to be trained about new product.

Promotion- promotional program to support the intoduction such as advertising, trade shows, samples, public relations.

Therefore research, timing and planning can all help increase probability of success.


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