Volume 5 Issue 1
IMA Educational Case Journal
David E. Stout
David E. Stout
THIS CASE FOCUSES ON SHORT-TERM PROFIT PLANNING FOR SEWMEX—a newly formed Mexican subsidiary of a U.S. company. The case is based on a real company in the sewing industry and as such forces students to think critically about the application of CVP concepts to a real-life situation. Sensitivity analysis is required to determine the impact of changes in production efficiencies on CVP relationships and profitability for the SEWMEX plant. Some applications of Excel are required to complete the case. Students are required to construct a written sum¬mary report regarding major issues raised in the case. Optional requirements focus on various issues regarding foreign exchange rates. Because of the richness of the case, it is targeted for use at the graduate level (e.g., MBA managerial accounting) or at an upper-level undergraduate course for accounting majors (e.g., cost accounting).
Keywords: short-term profit planning, CVP analysis, international business, sensitivity analysis writing assignment, foreign exchange rates (optional requirement), and foreign exchange rate risk (optional requirement).
Budgeting for an Academic Department at a State University: Can You Believe the Numbers?
DETERMINING THE FATE OF AN ACADEMIC DEPARTMENT: a case in university budgeting. The case involves an academic department with a chronic budget deficit. The upper administration wants to close the department or its bachelor’s program, believing that such action would save money. The problem is the university’s budget system. It treats all academic departments as cost centers without understanding that the static cost budget bears no relationship to the real costs of departments and fails to consider that departments generate revenues that would disappear in their absence. Because base budgets were set years ago and never realigned with changing needs, this department consistently runs a deficit. The case requires an ability to sort out relevant information and to deal with uncertainty. It demands that the student recognize that calculated and printed “results” are not sacred and that they may be wrong and misleading. It also illustrates the utter failure of budgets to plan and control when they are not established in a realistic manner.
Keywords: not-for-profit accounting, budgeting, cost centers, and university budgets.
Jensen Pharma: A Governance Role-Play
J. Kay Keels
Norman T. Sheehan
Norman T. Sheehan
JENSEN PHARMA IS A role-play that explores governance and ethical issues where shareholder demands and stakeholder considerations are in direct conflict. Board members and the members of the firm’s management team attending the meeting are asked to act out a broad range of issues, including concern for Jensen Pharma’s shareholders, its stakeholders, their personal values, career progression, and personal wealth. Learning objectives include learning about the role of governance and applying best practice guidelines to improve governance, while recognizing the ethical leadership responsibilities of the board of directors. The role-play has been tested several times and 99% of masters’ students and managers (n=150) using earlier versions of the role-play recommended that instructors at other universities adopt the role-play. The two most common reasons for recommending that other instructors adopt the role-play were that they found it fun, interesting, and an engaging way to learn about governance (n=47), while others recommended the role-play because they thought it was a good way to see what boards do and learn about governance (n=42).
Keywords: governance, boards, ethics, agency theory, and pharmaceutical industry.