Assume you are the division controller for Prairie Cookie Company. Prairie 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, Davis, has been brought in to replace the promoted manager. Davis notices that the Full of Chips cookie uses a lot of chips, which increases the cost of the cookie. As a result, Davis 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 Davis 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 discover why the chip costs have declined (fewer chips). Both you and Davis 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.