Ethics in Action
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?
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Managerial Accounting
- 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…arrow_forwardYou 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 cookie. As a result of the brand’s success, the product manager who launched the full of Chips brand has been promoted to division vie 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…arrow_forwardYou are the Division A controller for Company A Baked Goods Company. Company A recently introduced a new chocolate chip muffin brand called Plenti-O-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 muffin. As a result of the brand's success, the product manager who launched the Plenti-O-Chips brand has been promoted to division vice president. A new product manager, Ellen, has been brought in to replace the promoted manager. At Company A, product managers are evaluated on both the sales and profit margin of the products they manage. During her first week on the job, Ellen notices that the Plenti-O-Chips muffin uses a lot of chips, which increases the cost of the muffin. To improve the product's profitability, Ellen plans to reduce the amount of chips per muffin by 10%. She believes that a 10% reduction in chips will not adversely affect sales, but will…arrow_forward
- You are the Cookie division controller for Momma’s Baked Goods Company. The company recently introduced a new chocolate chip cookie brand called Chocked with 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 Chocked with Chips brand has been promoted to division vice president. A new product manager, William, has been brought in to replace the promoted manager. At Momma’s, product managers are evaluated on both the sales and profit margin of the products they manage. During his first week on the job, William notices that the Chocked with Chips cookie uses a lot of chips, which increases the cost of the cookie. To improve the product’s profitability, William plans to reduce the amount of chips per cookie by 10%. He believes that a 10% reduction in chips will not adversely affect…arrow_forwardAssume that you are the division controller for Auntie M’s Cookie Company. Auntie M 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 Chipscookie 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…arrow_forwardAssume you are the division controller for Auntie M’s Cookie Company. Auntie M 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 lot of chips, which increases the cost of the cookie. As a result, Bishop has ordered that the number 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 and because Bishop is in line for a big promotion, he believes that by achieving these higher sales, he will fare better for a promotion. To confirm, Bishop has enlisted you to help evaluate it.…arrow_forward
- Assume that you are the division controller for Auntie M’s Cookie Company. Auntie M 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…arrow_forwardAssume you are the division controller for Browning’s Cookie Company. Browning’s has introduced a new chocolate chip cookie called Full of Browning’s, and it was 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 Browning’s cookie uses a lot 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 the cookie line. You notice that there is a drop in the materials cost for Full of Browning’s. On further…arrow_forwardQ) Duncan's Pizzas is a chain of pizza stores. Pizzas are made fresh in-store, and then delivered to customers by a fleet of drivers. The senior management team has identified the strategic priorities for the business as on-time delivery and product quality. Required: a) For each of the strategic priorities, suggest three performance measures and explain it in details. b) If the company is successful in achieving challenging targets for these performance measures, will it also necessarily achieve high profitability? Explain your answer.arrow_forward
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