Cost of production reports segmented by the cookie line

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Reference no: EM131259471

Assume 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 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 Browning’s. You are trying to decide what to do, if anything.

Please give as much of a detailed answer as possible.

Reference no: EM131259471

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