Miller Cereals is a small milling company that makes a single brand of cereal. Recently, a business school intern recommended that the company introduce a second cereal in order to “diversify the product portfolio." Currently, the company shows an operating profit that s 25 percent of sales. With the single product, other costs were twice the cost of rent. The intern estimated that the incremental profit of the new cereal would only be 8.5 percent of the incremental revenue, but it would still add to total profit. On his last day, the intern told Miller's marketing manager that his analysis was on the company laptop in a spreadsheet with a file name, NewProduct.xlsx. The intern then left for a 12-month walkabout in the outback of Australia and cannot be eached. When the marketing manager opened the file, it was corrupted and could not be opened. She then found an early (incomplete) copy on the company's backup server. The incomplete spreadsheet is shown as follows. The marketing manager then called a cost nanagement accountant in the controller's office and asked for help in reconstructing the analysis. Required: As the management accountant, fill in the blank cells. (Do not round intermediate calculations. Round your final answers to the earest whole number. Enter all amounts as positive values.) Miller Cereals Projected Income Statement For One Year Status Quo: % Increase Alternative: Single Product (Decrease) Two Products Difference Sales revenue 25 % 2$ 73,000 Costs Material 53,000 66,500 Labor 25 % 66,500 Rent 40 % Depreciation 9,300 % 9,300 Utilities % 6,300 1,650 Other Total costs Operating profit %

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

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Transcribed Image Text:Miller Cereals is a small milling company that makes a single brand of cereal. Recently, a business school intern recommended that the company introduce a second cereal in order to "diversify the product portfolio." Currently, the company shows an operating profit that is 25 percent of sales. With the single product, other costs were twice the cost of rent. The intern estimated that the incremental profit of the new cereal would only be 8.5 percent of the incremental revenue, but it would still add to total profit. On his last day, the intern told Miller's marketing manager that his analysis was on the company laptop in a spreadsheet with a file name, NewProduct.xlsx. The intern then left for a 12-month walkabout in the outback of Australia and cannot be reached. When the marketing manager opened the file, it was corrupted and could not be opened. She then found an early (incomplete) copy on the company's backup server. The incomplete spreadsheet is shown as follows. The marketing manager then called a cost management accountant in the controller's office and asked for help in reconstructing the analysis. Required: As the management accountant, fill in the blank cells. (Do not round intermediate calculations. Round your final answers to the nearest whole number. Enter all amounts as positive values.) Miller Cereals Projected Income Statement For One Year Status Quo: % Increase Alternative: Single Product (Decrease) Two Products Difference Sales revenue 25 % $ 73,000 Costs Material 53,000 % 66,500 Labor 25 % 66,500 Rent 40 % Depreciation 9,300 % 9,300 Utilities % 6,300 1,650 Other Total costs Operating profit

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