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Volume 11 Issue 1

IMA Educational Case Journal
ISSN 1940-204X


Kenneth D. Machande, University of Mary Washington
Woodrow D. Richardson, University of Mary Washington


REBECCA, A COLLEGE STUDENT IN THE COST ACCOUNTING PROGRAM , has been asked by her dad, Jim, to advise him regarding the financial viability of buying a diesel vs. a gasoline truck. Rebecca’s dad provided her with the amenities on the vehicle in question along with the price premiums of the various engine options. He also supplied her with the Environmental Protection Agency (EPA) fuel economy estimates for each option. Rebecca used the U.S. Energy Information Administration’s website to obtain diesel and gasoline prices for five months. She must perform a capital budgeting analysis using current differential fixed costs, future potential differential variable costs, and project usage in order to present the results to her dad when she returns home for semester break.

Keywords: Capital budgeting, differential fixed costs, variable costs, time value of money.

Barbara Lamberton, University of Hartford

THIS CASE IS BASED ON A REAL ETHICAL DILEMMA situation faced by a controller who was new on the job. Some aspects of the setting were disguised. On the first day on the job, the newly appointed controller of a manufacturing business unit was approached by the senior accounting supervisor about a problem with the previous month’s reported results. Specifically, the supervisor stated that the prior controller’s action had resulted in a material distortion of the business unit’s income. With year-end approaching and incentive pay on the line, the controller is faced with a tough problem where quick, decisive, and ethical action is both critical and problematic.

Keywords: Ethics, organizational culture, incentive pay.

Jayanti Bandyopadhyay, Salem State University
Miranda Lam, Salem State University
Sanjay Kudrimoti, Salem State University

THE TREASURER OF THE STAGE ENSEMBLE THEATRE UNIT, INC . (SETU, a 501(c)(3) nonprofit) took on the challenge of educating everyone associated with SETU about how not-for-profit organizations need to generate positive cash flows and how paying attention to cash flows is critical to the organization’s long-term survival. The exercises were designed to help students calculate the number of tickets needed to be sold to break even through utilizing the budgeting process. The case provided a hands-on exercise for identifying fixed, step, variable, and hidden costs; calculating breakeven points with a sales mix; and utilizing strategic decision making in a small not-for-profit community theater company. Using an actual not-for-profit theater company provided an attractive alternative to teaching managerial accounting and finance concepts from textbooks.

Keywords: Break-even analysis, budgeting for not-for-profits, hidden costs, pricing strategy, spreadsheet tools.