The Cost Component of Kellogg's Cereal Kellogg’s is the world leading producer of cereals and convenience foods. They offer a variety of cereals to kids for good taste and to moms for easy to make. Being a leading producer, Kellogg’s should consider the cost of its cereals and current issues dealing with it. In today’s era there are many factors affecting costs of products which became the source of rise in prices and quality reduction. Not only implicit costs but also explicit costs affect the product of a company. Kellogg said that high commodity costs led to a one per cent decrease in operating profit during the third quarter, despite a six per cent increase in sales. Like many food companies, Kellogg is struggling to maintain margins as the cost of commodities, particularly sugar and wheat, continue to rise. (Charlotte Eyre, 2007) The marginal cost of production is the increase in total cost as a result of producing one extra unit. This cost cannot be affected by fixed cost of any commodity, due to which profit maximizing quantity and price does not change. Revenue is the money the company receives for selling their product or service. It is calculated by taking the selling price and multiplying it by the number of units sold.