Intermediate Accounting: Reporting And Analysis
3rd Edition
ISBN: 9781337788281
Author: James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher: Cengage Learning
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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 20 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 10.5 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
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.)
Transcribed Image Text:Miller Cereals
Projected Income Statement
For One Year
Status Quo:
% Increase
Alternative:
Single Product
(Decrease)
Two Products
Difference
Sales revenue
40 %
$
68,000
Costs
Material
48,000
%
64,000
Labor
25 %
64,000
Rent
50 %
Depreciation
8,800
%
8,800
Utilities
%
5,800
1,400
Other
Total costs
Operating profit
%
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