Describe the relevant revenue and cost considerations

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Reference no: EM13127272

The baking process for Pop Tarts leaves about 5% scrap for each ingredient. Kellogg’s design team has identified a new product called “Mini Pop Tarts” that can use about 85% of the scrap material as the key ingredients. The new product will require additional icing, direct labor and machine time along with specific marketing and promotion. No other costs are expected to change and the additional revenue is expected to be in addition to the main line Pop Tarts and thus will not adversely affect current sales but it will increase overall sales by 8%. Should Kellogg use the scrap and process the product further? Discuss the relevant revenue and cost considerations and other relevant issues in your response.

Reference no: EM13127272

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