Is this an ethical strategy for William to pursue? What are the potential implications of this strategy? What would you say to the division vice president?
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 sales, but will reduce cost and, hence, help him improve the profit margin. William is focused on profit margins, because he knows that if he is able to increase the profitability of the Chocked with Chips brand, he will be in line for a big promotion.
To confirm this plan, William 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 Chocked with 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 William report to the division vice president, who was the original product manager for the Chocked with Chips brand who was responsible for reducing the chip count in prior periods.
Step 1 – Answer the following question…What options might you, as the controller, consider taking in response to William’s plan? Your discussion should be at least 500 words. In your discussion addressing the question, also consider (and address) the following…
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- Is this an ethical strategy for William to pursue?
- What are the potential implications of this strategy?
- What would you say to the division vice president?
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