Management Accounting Case Book

The Gatekeepers: A Case on Allocations and Justifications

David HurttAssociate Professor of AccountingBaylor University

Bradley LailAssistant Professor of AccountingBaylor University

Michael RobinsonProfessor of AccountingBaylor University

Martin StuebsAssociate Professor of AccountingBaylor University

INTRODUCTION

This case provides an opportunity for you to make accounting allocation choices, justify those choices, and subsequently consider their ramifications. In this case study, we present students with two different scenarios—one takes place in an academic setting, and one in a business setting—that examine the incentives and reporting issues faced by managers and accountants as gatekeepers of their reporting environments. For each scenario, you will read the case materials and then answer the “Questions for Analysis.” Each scenario presents you with an allocation task. In the first scenario, an allocation task in an academic setting, you will assess group members’ contributions to a project and allocate points across the group. These point allocations contribute to determining individual group member’s grades. The second scenario is also an allocation task but in a business setting—specifically the segment reporting environment. Here the task is to allocate indirect costs across reporting segments. For advanced reading, consider Accounting Standards Codification (ASC) Topic 280, “Segment Reporting,” which can help guide you in the degree of flexibility, if any, allowed ...