Kellogg's Has Several Cereals Targeted at Different Types of Users

question 168

Multiple Choice

Kellogg's has several cereals targeted at different types of users.This is an example of multiple products aimed at multiple markets.Manufacturing these different cereals is clearly more expensive than producing one,but seems worthwhile if it serves customers' needs better,doesn't reduce quality or increase price,and

• A)conforms to all FDA guidelines.
• B)adds to the manufacturer's sales revenues and profits.
• C)creates economy of scale.
• D)decreases the cost of the physical plant.
• E)stabilizes the sales revenues and profits.

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Definitions:

Variable Cost

Costs that change in proportion to the level of production or business activity, such as materials, labor, and utility costs.

Fixed Costs

Costs that do not vary with the level of production or sales, such as rent, salary, or insurance, providing stability to a company's expense structure.

Margin of Safety

The difference between actual or projected sales and the break-even point, often expressed as a percentage.

Contribution Margin Ratio

A financial metric showing the percentage of revenue that exceeds total variable costs, indicating how much revenue contributes to fixed costs and profit.