Is this an ethical strategy for Brandon to pursue? What are the potential implications of this strategy? What options might you, as the controller, consider taking in response to Brandon’s plan?

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
icon
Related questions
Question

You are the Cookie division controller for Auntie M’s Baked Goods Company. Auntie M recently introduced a new chocolate chip cookie brand called Full of Chips, which has more than twice as many chips as any other brand on the market. The brand has quickly become a huge market success, largely because of the number of chips in each cookie. As a result of the brand’s success, the product manager who launched the Full of Chips brand has been promoted to division vice president. A new product manager, Brandon, has been brought in to replace the promoted manager.

At Auntie M’s, product managers are evaluated on both the sales and profit margin of the products they manage. During his first week on the job, Brandon notices that the Full of Chips cookie uses a lot of chips, which increases the cost of the cookie. To improve the product’s profitability, Brandon plans to reduce the amount of chips per cookie by 10%. He believes that a 10% reduction in chips will not adversely affect sales, but will reduce cost and, hence, help him improve the profit margin. Brandon is focused on profit margins, because he knows that if he is able to increase the profitability of the Full of Chips brand, he will be in line for a big promotion.

To confirm this plan, Brandon has enlisted you to help evaluate it. After reviewing the cost of production reports segmented by cookie brand, you notice that there has been a continual drop in the materials costs for the Full of Chips brand since its launch. On further investigation, you discover that chip costs have declined because the previous product manager continually reduced the number of chips in each cookie. Both you and Brandon report to the division vice president, who was the original product manager for the Full of Chips brand who was responsible for reducing the chip count in prior periods.

  1. Is this an ethical strategy for Brandon to pursue? What are the potential implications of this strategy?
  2. What options might you, as the controller, consider taking in response to Brandon’s plan?
Expert Solution
trending now

Trending now

This is a popular solution!

steps

Step by step

Solved in 2 steps

Blurred answer
Knowledge Booster
Strategic business units
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.
Similar questions
Recommended textbooks for you
FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
Accounting
ISBN:
9781259964947
Author:
Libby
Publisher:
MCG
Accounting
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education