Volume 7 Issue 2
IMA Educational Case Journal
Nicholas J. Fessler
THIS CASE PLACES STUDENTS IN THE CONTEXT OF THE VIDEO GAME INDUSTRY and a developing competition between the best-selling video game in history, the Active Duty series, and Video Game Entertainment’s directly competing product, the TrueWar series. The industry is enormous—the best-selling video games have higher sales than the best-selling movies, and video game development costs (all of which are incurred prior to earning any revenue) can amount to hundreds of millions of dollars. Many students participate in this segment of the entertainment industry as consumers. This fictionalized case helps students better understand the business behind the entertainment. In the context of a parent and subsidiary organization, instructors can use the case to discuss accounting topics such as what-if analysis, transfer pricing, return on investment (ROI) calculations, and product line evaluation (the purchase of a subsidiary business). The case primarily covers cost and managerial accounting topics but does so in a context where consolidated financial statements are prepared by the parent company.
Keywords: video game industry, parent and subsidiary, what-if analysis, return on investment, transfer pricing.
Over-land Trucking and Freight: Relevant Costs for Decision Making
Thomas L. Albright
OVER-LAND TRUCKING AND FREIGHT HAS A long-established and mutually beneficial business relationship with a major international automotive parts company, FHP Technologies. Management at FHP has approached Over-land with a request to provide additional routes that are important to the efficiency of its supply chain. Over-land’s management wishes to nurture the business relationship with FHP but is concerned about the available capacity to service the new routes, potential risks, and profitability associated with FHP’s request.
Keywords: cost behavior, breakeven, point of indifference, relevant costing, capacity.
Dynamic Medical Solutions: Expanding the Application of Cost Management Principles to Channel and Customer Profitability Analysis
Casey J. McNellis
Ronald F. Premuroso
Ronald F. Premuroso
THIS CASE DESCRIBES THE SALES OF DYNAMIC MEDICAL SOLUTIONS (DMS), a medical products supplier (as a retailer of products manufactured by others), whose reimbursements for sales made to customers eligible for Medicare and Medicaid appear to be in violation of government reimbursement guidelines. The case is an illustration of one of the major emerging trends in management accounting: expansion of profitability analysis from cost allocations focused primarily on product costs to sales channels and/or customer types, including the allocation of non-product costs. This real-world case requires students to first understand the dilemma faced by the company, including information regarding certain products and sales channels and related product cost data, departmental processes, and related operating expenses from its latest year of operations. The student’s task is to evaluate alternatives the company should consider with regard to cost allocations to specific products and sales channels along with their resulting impact on product pricing and channel profitability. Students will then be in a position to make recommendations ensuring both qualitative and quantitative compliance with government regulations for Medicare and Medicaid reimbursements.
Keywords: product line profitability analysis, Medicare, Medicaid, “good cause.”