Question

thoroughly explain how Total Material Costs were determined by any company that makes any type of Breakfast Cereal for the purpose of establishing a reasonable selling price for one or more of their Breakfast Cereals.

Answer 1

ANS.

Breakfast is one of the most important meals of the day as it replenishes our body's energy after an all-night fast. A healthy breakfast significantly improves mental and physical performance of both children & adults. Essentially Breakfast should be low in fat, cholesterol and high in vitamins & minerals.

Breakfast cereal is a food made from processed grains that is often eaten as the first meal of the day. It is eaten hot or cold, usually mixed with milk and sometimes yogurt or fruit.

The market is characterized by the growing demand for ready-to-eat breakfast cereals. Due to increasing health issues of highly processed food products, the need for the consumption of cereals are important. Hence, the changing lifestyle and the booming food industry have driven the demand for these ingredients.

In 2013, rice and wheat breakfast cereal ingredients accounted for a major share in terms of value of the total breakfast cereal ingredients market. The steady increase in demand for quick, yet healthy products is projected to increase the market share in terms of value of these ingredients by 2019.

North America formed the largest segment of the breakfast cereal ingredients market in 2013. It is estimated to grow at a CAGR of 1.8% over the projected period. Asia-Pacific is estimated to be the second-largest market due to an increase in the demand for processed food in the region. It is also projected to gain the fastest growth during the same period.Breakfast cereals witnessed current value growth of 25% in 2014. The primary consumers for breakfast cereals continued to be urban consumers. This was because urban consumers prefer a fast arrangement for breakfast due to their lifestyles, and breakfast cereals, especially flakes, provide exactly that. Hence, flakes, and particularly corn flakes in India were very popular for exactly this reason in 2014.

Breakfast cereals is expected to grow by a value CAGR of 13% at constant 2014 prices during the forecast period. This will be driven by muesli, which is expected to grow by a value CAGR of 17% at constant 2014 prices. Muesli was still relatively new in India, and consumers received it really well. Hence, the growth opportunity for the same is very high, as its retail distribution and availability both were still nascent.