BE - Quaker Oats - Spring 2011 - letterhead

BE - Quaker Oats - Spring 2011 - letterhead - Eric M....

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phone 215 - 204 - 7039 email ProfessorE@temple.edu web www.eric - eisenstein.com Eric M. Eisenstein 1801 Liacouras Walk 527 Alter Hall (006 - 09) Philadelphia, PA 19122 Page 1 of 2 Quaker Instant Oatmeal You are analyzing Quaker Instant Oatmeal as a consultant. Fox Grocery sells a box of Plain (unflavored) Quaker Instant Oats for $2.25 to consumers. The owner tells you that she gets a 25% margin on each package. The local distributor for Quaker, Philadelphia Snack Company, takes a 20% margin. The manager of the Quaker Oatmeal plant gives you the following data about the production of the cereal. There are no other relevant costs. Equipment: $5 million cost, straight-line depreciated over 10 years, 0 salvage value Product line workers and managers (includes salary & benefits): $275,000/year Advertising: $1,500,000 per year Oatmeal ingredients: $0.60/box Individual wrappers: $0.04/packet. Each box contains 8 packets. Delivery: $0.05 per box a) What is the selling price from Quaker to Philadelphia Snack Company for a box of oatmeal? b) Assume that all oatmeal produced at this plant is sold under the same distribution agreement, price, and margins as Fox Grocery. What is the unit contribution (for Quaker) for a box of oatmeal? c) What is the Total Break Even Unit Volume (TBEV) for Plain Oatmeal? (Use accounting B/E) d) The manager of this Plain Oatmeal product indicates that Quaker wishes to make $7,000,000 in profit each year. How many boxes of Plain Oatmeal must they sell in order to achieve this amount of profit?
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BE - Quaker Oats - Spring 2011 - letterhead - Eric M....

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