Volume 3 Issue 3
IMA Educational Case Journal
Alfred J. Nanni, Jr.
This case describes a situation at an organic farm. The crops have been planted, but weather has affected the expected yields. A decision must be made about the profit-maximizing sales channels to choose given the unexpectedly limited output. The people, places, and quantitative data reflect actual observations, but some detail has been omitted or simplified for pedagogical purposes. The case was developed to integrate two academic dis¬ciplines: management accounting and quantitative methods. Once the technical aspects of the case analysis have been covered, class sessions have produced rich managerial discussions. The primary teaching objectives for this case are to explore distribution channel profitability from a differential analysis perspective and to introduce the concept of integer programming. Although the analyses can be compli¬cated, the setting is a simple one that all students can readily visualize.
Keywords: differential analysis, incremental analysis, channel margin, linear programming, and integer programming.
The Pudong Coffee Shop
This case describes a conveniently located but relatively small coffee shop in Pudong (Shanghai). It is a family-owned and managed business. During the previous two years overall sales and profit performance of the business has been disappointing in the context of increased popularity of coffee consumption in China. Thus the current position of the business presents a challenge and opportunity for the manager of this coffee shop. This case requires a coherent analysis of the current situation of the business together with clear recommendations for its future direction and profit improvement. In turn, an integrated set of performance measures should be identified, based on identified critical success factors. A financial forecast is also required, based on given assumptions, and candidates are also invited to provide general business advice including those relating to the current valuation of the business. In this case study, students assume the role of consultant hired by the owner of an Chinese coffee shop to recommend a plan to improve performance.
Keywords: profit improvement planning and implementation, performance measurement, strategy and budgeting, small business, and China.
Alternative Costing Methods: Precision Paint Shop’s Dilemma
In this case students are presented an opportunity to identify the various roles a costing system can play in supporting strategic management decisions. The setting is a privately held custom coater of automotive components to original equipment manufacturers (OEMs). Historically the company took just about all the work it was offered and management was using a form of standard costing to evaluate product profitability. Demand was increasing but along with the increase in volume came a decrease in profits and management could not understand why. There had been a recent switch to an ABC system to better understand the costs associated with painting the various products, but now management is unsure if this system is providing the information they need for effective decision making. Throughput costing based on Theory of Constraints (TOC) and Resource Consumption Accounting (RCA) have now been offered as alternatives for supporting strategic decision making and the students are asked to help management make a decision about their costing system.
Keywords: costing system, activity-based costing, resource consumption accounting, and theory of constraints.