Volume 7 Issue 3
IMA Educational Case Journal
COST ACCOUNTING TEXTBOOKS TYPICALLY FOCUS ON manufacturers with less emphasis on applying cost accounting practices in service companies. But, understanding the costs to sell, produce, and administer products is extremely important in both service and manufacturing industries. Many service companies, such as banks and insurance companies, have very large administrative functions and use cost accounting principles as a means to understand costs, improve cost effectiveness, and profit margins. The case is based on an actual project that updated the product cost allocation process at a large insurance company (we used a fictional company name and accompanying data).
Keywords: cost allocations, product costs, activity-based costing (ABC).
Sunk Costs: What Costs Do You Sea?
COMPANIES’ RESPONSIBILITIES FOR SAFETY ARE IMPORTANT SOCIAL AND ENVIRONMENTAL CONCERNS. This fictional case—inspired by recent actual events—presents a capital investment intended to improve cruise ship safety. Both managerial accounting investment analyses and ethical recognition of responsibilities play necessary roles in the safety investment decisions. The case also refers to and encourages use of the IMA® Statement of Ethical Professional Practice. Since the case blends managerial accounting and ethics, it is suitable for a number of managerial accounting and accounting ethics courses.
Keywords: capital budgeting, capital investments, safety investments, ethics, responsibility, managerial and cost accounting analyses, decision making.
Cat & Joe’s Pig Rig: Should We Stay or Should We Go?
CATHY OBERTOWITCH AND JOE THOMPSON HAD JUST RECEIVED AN INVITATION TO bring their food truck, Cat & Joe’s Pig Rig, to a rodeo event in a town 70 kilometers away. They weren’t sure whether attending the special event would be worth their time, effort, and expense or if they would be better off not attending at all and continuing with business as usual. This case encourages students to analyze the profitability and viability of attending the event and to examine both the financial and nonfinancial aspects of the decision. Students will be called upon to perform breakeven calculations, a target profit analysis, and a “what if?” analysis of the opportunity. This case represents a straightforward, real-world application of Cost-Volume-Profit (CVP) analysis.
Keywords: CVP analysis, breakeven analysis, food trucks, “what-if?” analysis.