For Question 1 and 2 Do not use outside resources for your answers. Make sure to include in-text citations with supporting reference.
1. 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.
- Is this an ethical strategy for Brandon to pursue? What are the potential implications of this strategy
- What options might you, as the controller, consider taking in response to Brandon’s plan?
2. The controller of Tri Con Global Systems Inc. has developed a new costing system that traces the cost of activities to products. The new system is able to measure post-manufacturing activities, such as selling, promotional, and distribution activities, and allocate these activities to products in a manner that provides a more complete view of the company’s product costs. This system produces better strategic information about the relative profitability of product lines.
In the course of implementing the new costing system, the controller realized that the company’s current period GAAP net income would increase significantly if the new product cost information were used for inventory valuation on the financial statements. The controller has been under intense pressure to improve the company’s net income, and this would be an easy and effective way for her to help meet the company’s short-term net income goals. As a result, she has decided to use the new costing system to determine GAAP net income.
-Why does the company’s net income increase when the new costing system is applied
-Is the controller acting ethically by using the new costing system for GAAP net income? Explain your answer.
3. Feedback is a critical piece of the performance management process and a skill that all managers must develop. The text provides numerous ideas for enhancing feedback. Assuming you are in a management role, select two enhancements that you would like to develop immediately and describe how they will help you better develop your employees.