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Decline of Cookie Costs

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Consider the following scenario:

Assume you are the division controller for Norwich Cookie Company. You are looking over some cost of production reports segmented by cookie line. You notice there is a drop in the material and labor costs for "Chips for Days", a best-selling cookie. On further investigation you discover why chip costs have declined.

Detail what has caused the decline in material and labor costs for this particular brand of cookie. Is it realistic to believe that these costs will continue to decline? Explain your reasoning. Please help.

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Solution Summary

The expert examines the declining cost of cookies.

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ANSWERS

NOTE: The post is the OTA's own words.

There are several factors that could explain the decline in the direct materials and direct labor costs. One factor is that the company was able to negotiate better terms with its suppliers which could be the result of more frequent orders or bulk orders. A factor that could have ...

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