Question
Kellogg makes several types of cereals including Bran, Wheaties and Rice. The Company's financial data for the past year follows: Wheaties Rice Bran Revenue 500,000
Kellogg makes several types of cereals including Bran, Wheaties and Rice. The Company's financial data for the past year follows:
Wheaties Rice Bran
Revenue 500,000 450,000 250,000
Variable Cost 100,000 90,000 150,000
Contribution Margin 400,000 360,000 100,000
Fixed Costs 200,000 210,000 200,000
Operating Income (OI) 200,000 150,000 (100,000)
The CEO is concerned with the losses being incurred by Bran Cereal and has asked to you the product manager to consider discontinuing the Bran Cereal product line. You have determined that if Bran cereal is discontinued the fixed cost associated with the Bran Cereal product line would continue over the intermediate term and would be allocated to the remaining product lines. If Kellogg discontinues Bran Cereal what would the impact on the Company's overall OI be? Don't not use dollar signs ($) in your answer but provide comma's where appropriate. If the impact is a negative number use brackets ( ).
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