Question

Assume you are the division controller for Auntie Ms 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 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 dmagns wouhelph mt po targetfe the riod 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.

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Answer #1

Based on the information provided in the case study, it can be seen that the main ingredient in the Full of Chips cookies is the chips used in preparing it. It is because of this uniqueness that the product became instant success. In other words, it can be concluded that if the quantity of chips used in manufacturing these cookies is reduced, it is highly likely that the quality of product will get affected which in turn might affect its sales and consequently the profit margins. The new product manager (Bishop) is focusing on reducing the quantity of chips in order to reduce the material cost and achieve desired profit margins.

As a division controller, I will try to discuss the matter with Bishop (before reporting the issue to division vice president) and explain him the possible impact of this change on the quality of product. Bishop should understand that by compromising on the quantity of main component, he would directly be affecting the sales of the product in the near future (as the impact may not be seen immediately). However, if no action is taken by Bishop, it is my responsibility to bring this issue to the notice of the division vice president (previous product manager). I would also confirm with the division vice president as to whether he was aware of this change and has he approved Bishop's decision. If the change was made with the consent of the division vice president, I might have to report the issue to the management and share my findings with them. It is important to understand that business decisions should not be taken with the intention to meet personal goals/targets as such decisions affect business performance in the long run.

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