Kellogg’s Raisin Bran is famous for its advertising slogan of “Two scoops of raisins in every box.” The current box design for Raisin Bran shows two scoops of raisins on the front of the box.
A few months ago, a post went viral on Reddit that showed a picture of the raisins actually found in the post writer’s box of Raisin Bran. The pile of raisins appeared to be quite small. Next, two writers from Tech Insider measured the raisins versus flakes in two boxes of Kellogg’s Raisin Bran. They found that, in this admittedly small sample size of two boxes, two scoops averaged out to be 1.25 cups of raisins, or about 13.9% of the total cereal (see http://www.techinsider.io/raisins-in-raisin-bran-two-scoops-quantity-2016-4.) During this same time, social media lit up with other Kellogg’s Raisin Bran customers questioning the quantity of raisins in their boxes.
Back to the Reddit post. The photo posted showed the raisin quantity in the post writer’s box to be much less than 1.25 scoops. If Kellogg’s production of Raisin Bran used this quantity of raisins (the amount shown in the Reddit post) in all of the boxes it produced during that production run, then the materials quantity variance for raisins would have been favorable and significant.
By the way, the words “Raisin Bran” cannot be trademarked; those words were deemed to be too common to be allowed to trademark them. As a result, several companies produce and market their own “Raisin Bran.”
Required: In a response of 350-400 words, answer two of the following questions and post your response:
1) Based on the information given, what would the standard quantity of raisins per box be?
2) Is a favorable raisin quantity variance good for Kellogg’s Raisin Bran? Explain.
3) What could cause an unfavorable raisin quantity variance for Kellogg’s Raisin Bran? Would the unfavorable quantity variance be good for Kellogg’s Raisin Bran? Why or why not?
4) Would the direct materials price variance for raisins likely be related to the direct materials quantity variance? Explain.
The Correct Answer and Explanation is :
Answer to Questions 1 and 3:
1) What would the standard quantity of raisins per box be?
Based on the information provided, the standard quantity of raisins per box of Kellogg’s Raisin Bran can be estimated. The Tech Insider study found that in a sample of two boxes, the two scoops of raisins amounted to approximately 1.25 cups of raisins, making up about 13.9% of the total cereal in the box. Using this percentage, we can calculate the standard quantity of raisins per box.
If 1.25 cups represents 13.9% of the total cereal, the full amount of cereal in each box is:
[
\text{Total cereal in the box} = \frac{1.25 \text{ cups}}{0.139} \approx 8.99 \text{ cups}
]
Therefore, we can conclude that the standard quantity of raisins in each box is 1.25 cups, representing 13.9% of the total cereal content.
3) What could cause an unfavorable raisin quantity variance for Kellogg’s Raisin Bran? Would the unfavorable quantity variance be good for Kellogg’s Raisin Bran? Why or why not?
An unfavorable raisin quantity variance occurs when the actual amount of raisins used is higher than the standard amount. There are several reasons why this could happen. For example:
- Poor quality control or errors in production: If workers or machines fail to measure or allocate the raisins correctly, more raisins may be used than the standard amount.
- Overfilling of raisins: If the machinery designed to dispense raisins malfunctions, leading to an excess of raisins being added to each box, it would lead to an unfavorable variance.
- Waste: Losses during production, such as raisins being wasted due to mishandling or damage, could cause the actual quantity of usable raisins to be greater than planned.
An unfavorable quantity variance is not beneficial for Kellogg’s Raisin Bran, because it results in the company using more raisins than anticipated. Raisins are a cost item in production, and increasing the quantity of raisins without a corresponding increase in revenue or pricing would lead to higher production costs. This would erode the company’s profit margin and affect overall profitability.
If the company has to continuously use more raisins than expected, this would reduce cost efficiency, potentially leading to higher prices for consumers or reduced profitability for Kellogg’s. Thus, it’s generally in the company’s best interest to minimize unfavorable variances to maintain cost control and financial stability.