When the chocolate used in Cadbury Creme Eggs was changed to a less expensive chocolate, what variances would have been impacted?

Photo of a chocolate egg

Copyright: Keith Homan, http://depositphotos.com/home.html

A Cadbury Creme Egg is an egg-shaped chocolate candy that weighs about 35 grams, or a little more than 1.2 ounces. It is filled with a white fondant and a smaller amount of yellow fondant, meant to mimic an actual egg.  (Fondant is a type of sugar syrup.) In the U.S., Cadbury Creme Eggs are marketed and distributed by The Hershey Company.

The Creme Eggs are produced by Cadbury Adams in Canada and by Cadbury UK in the United Kingdom. In the UK factory, 1.5 million Creme Eggs are manufactured per day. Creme Eggs have been sold in the U.S. under the Cadbury Creme Egg name since 1971. Creme Eggs are sold every year from New Year’s Day until Easter.

In 2015, Cadbury changed its formula for the eggs by replacing its Cadbury Dairy Milk chocolate with “standard cocoa mix chocolate.” The standard chocolate is a less expensive ingredient than the Cadbury Dairy Milk.  The company assured customers that the taste of the Creme Eggs would not change.

Consumers reacted negatively to the recipe change.  Sales of Cadbury Creme Eggs have fallen by more than $14 million since the chocolate substitution; this drop has been speculated to have been caused by the change in the recipe.

Questions

  1. Assume that Cadbury uses standard costing in its manufacturing operations. What variance would have been impacted by the decrease in the cost of the chocolate used in the Cadbury eggs? Would this variance have been favorable or unfavorable? What position or department within Cadbury would have been responsible for that variance?
  2. What variance would have been impacted by the drop in sales revenue from the recipe change? Would this variance have been favorable or unfavorable? What position or department within Cadbury would have been responsible for that variance?
  3. Do you think the change in recipe was a good move for Cadbury? Explain.

Instructor Resources

These resources are provided to give the instructor flexibility for use of Accounting in the Headlines articles in the classroom. The blog posting itself can be assigned via a link to this site OR by distributing the student handout below. Alternatively, the PowerPoint file below contains a bullet point overview of the article and the discussion questions.

  • Student handout (pdf) (word) (contains entire blog posting + discussion questions)
  • PowerPoint file (brief article overview + discussion questions)

Creative Commons License

This work is licensed under a Creative Commons Attribution-NonCommercial 3.0 Unported License.

About Dr. Wendy Tietz, CPA, CMA, CGMA

Dr. Wendy Tietz is a professor of accounting at Kent State University in Kent, Ohio, USA. She is also a textbook author with Pearson Prentice-Hall.

No comments yet... Be the first to leave a reply!

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: