Question

Last year, you estimated you would earn $5 million in sales revenues from developing a new product. So far, you have spent $3 million developing the product, but it is not yet complete. Meanwhile, this year you have new sales projections that show expected revenues from the new product will actually be only $4 million. How much should you be willing to spend to complete the product development?

Answer 1

Answer:

Up to $4 million

Explanation:

The $3 million spent in developing the product is the sunk cost which is irrelevant in the analysis of how much to spend on the project.

Since it is expected that the project would generate $4 million, up to $4 million is the amount the amount that should be spent on the completion of the project.

I hope my answer helps you