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Accounting

27th Edition
WARREN + 5 others
ISBN: 9781337272094

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BuyFindarrow_forward

Accounting

27th Edition
WARREN + 5 others
ISBN: 9781337272094
Textbook Problem

Ethics in Action

Assume that you are the division controller for Auntie M’s Cookie Company. Auntie .\l has introduced a new chocolate chip cookie called Full of Chips, and it is a success. As a result, the product manager responsible for the launch of this new cookie was promoted to division vice president and became your boss. A new product manager. Bishop, has been brought in to replace the promoted manager. Bishop notices that the Full of Chips cookie uses a great deal of chips, which increases the cost of the cookie. As a result. Bishop has ordered that the amount of chips used in the cookies be reduced by 10%. The manager believes that a 10% reduction in chips will not adversely affect sales but will reduce costs and. hence, improve margins. The increased margins would help Bishop meet profit targets for the period.

You are looking over some cost of production reports segmented by cookie line. You notice that there is a drop in the materials costs for Full of Chips. On further investigation. you discover why the chip costs have declined (fewer chips). Both you and Bishop report to the division vice president, who was the original product manager for Full of Chips. You are trying to decide what to do. if anything.

Discuss the options you might consider.

(1)

Process costs

It is a method of cost accounting, which is used where the production is continuous, and the product needs various processes to complete. This method is used to ascertain the cost of the product at each process or stage of production.

To determine

To State: Is this ethical strategy for B to pursue or not.

Explanation

In this case, the first decrease in chips had no effect on the market. The manager was moved to next level, and the following manger use the same strategy, similar decrease in chips by 10%. Again it worked. The following manager prepared the same thing. All of sudden, the market demand reduced for the cookie. An inception was reached, and the cookie was in woe in the market...

(2)

To determine

To Consider: If the controller taking in response to B’s plan, what option might be used.

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