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

question 62

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 adds to the manufacturer's sales revenues and profits, serves customers' needs better, and

• A)conforms to all FDA guidelines.
• B)creates economy of scale.
• C)doesn't reduce quality or increase price.
• D)decreases the cost of the physical plant.
• E)stabilizes the sales revenues and profits.

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Definitions:

Activity-Based Costing

A financial methodology that calculates the cost of products and services by identifying activities related to production and assigning costs to each product accordingly.

Direct Labor-Hours

The total number of hours worked by employees directly involved in the manufacturing process.

Direct Materials Cost

The cost of raw materials that can be directly attributed to the production of a finished good.

Activity-Based Costing

A costing methodology that assigns overhead and indirect costs to specific products or activities based on their consumption of resources.