Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Illinois Cereal Company currently produces cereal targeted to consumers over 40 years of age. Sales have steadily declined over the last 10 years resulting
Illinois Cereal Company currently produces cereal targeted to consumers over 40 years of age. Sales have steadily declined over the last 10 years resulting in a decision to shut down the manufacturing plant. The plant was built 40 years ago at a cost of $28,000,000 and is now fully depreciated. A rival cereal company has offered to purchase the existing facility for $15,000,000 in as is condition. The Vice President in charge of the plant has developed an alternative to closing the plant. The Vice President has proposed using the existing plant to manufacture wheat flakes, corn flakes, and rice flakes targeted to consumers under 10 years of age. The VP estimates sales of wheat flakes to be 400,000 cases in the first year, 630,000 cases in the second year, and to escalate at 4% for years 3, 4, and 5 and at 3% annually thereafter. Sales of corn flakes are estimated at 500,000 cases in the first year, 810,000 cases in the second year, and to increase at 3% for years 3,4 and 5 and at 2% annually thereafter. Rice flakes will not be produced until the third year. Sales of rice flakes are estimated at 210,000 cases in year three, 340,000 cases in year four and to increase at 5% for years 5, 6, and 7 and at 2% annually thereafter. The sales price of wheat flakes will be $110 per case in year one, $130 per case in year two, and will increase 4% annually
Step by Step Solution
★★★★★
3.46 Rating (153 Votes )
There are 3 Steps involved in it
Step: 1
Illinois Cereal Company Repositioning for a Younger Audience This analysis examines the proposal to repurpose the existing plant for manufacturing chi...Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started