Managerial Accounting

Barney Briggs owns a restaurant franchise that is part of a chain of “southern homestyle”restaurants. One of the chain’s popular breakfast items is biscuits and gravy. CentralWarehouse makes and freezes the biscuit dough, which is then sold to the franchisestores; there, it is thawed and baked in the individual stores by the cook. Each franchisealso has a purchasing agent who orders the biscuits (and other items) based on expecteddemand. In March, 2012, one of the freezers in Central Warehouse breaks down andbiscuit production is reduced by 25% for three days. During those three days, Barney’sfranchise runs out of biscuits but demand does not slow down. Barney’s franchise cook,Janet Trible, sends one of the kitchen helpers to the local grocery store to buyrefrigerated ready-tobake biscuits. Although the customers are kept happy, therefrigerated biscuits cost Barney’s franchise three times the cost of the CentralWarehouse frozen biscuits, and the franchise loses money on this item for those threedays. Barney is angry with the purchasing agent for not ordering enough biscuits to avoidrunning out of stock, and with Janet for spending too much money on the replacementbiscuits.

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Who is responsible for the cost of the biscuits?

At what level is the costcontrollable?

Do you agree that Barney should be angry with the purchasing agent? WithJanet? Why or why not?

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