Part 1 of 4:We are evaluating the introduction of a new product with significant features that we believe the customers will like and will be willing to pay a premium to the price of our current product. To be safe, we will not discontinue the sale of the older product until demand diminishes and the old product is replaced by the sales of the new product. How would you model the lost sales of the old product?

Is this a relevant cost and if so, would it be a positive or negative cash flow?

Part 2 of 4:Using the situation described in the previous problem, assume that we will need to advertise the availability of the new product and we expect this cost to increase our advertising budget by $100,000. How would you model this additional advertising expense related to the new product? Is this a relevant cost and if so, would it be a positive or negative cash flow?

Part 3 or 4:Continuing with this same situation as the previous qustion, assume that current factory overhead is $150,000 per year but after the new product is introduced, the factory overhead will increase to $200,000 because the new product requires addition procedures.How much (if any) of the factory overhead should be modeled with the new product?Would this be modeled as a positive or negative cash flow?

Part 4 of 4:Continuing with the factory overhead situation described above, how would you model the factory overhead if new product is expected to replace 50% of the old product's sales in first year and the rest of the old products sales in the second year?