Accounting is like a box of chocolates: A lesson in cost behavior

Abstract

Abstract This case is designed to be used in an introductory managerial accounting class to illustrate cost behavior and break-even analysis in a non-manufacturing setting. Revenue and expense information related to Paramount Pictures' hit movie Forrest Gump is provided and students are required to prepare a traditional income statement, identify fixed and variable costs, prepare a contribution format income statement, and consider the effects of changing from a variable cost structure to a fixed cost structure. While not a primary focus of the case, the material does allow for a discussion comparing internal reporting to external financial reporting and the applicability of GAAP in each setting. The short length of the case allows it to be distributed, read and solved within a single 90-minute class period. Suggestions for cooperative learning assignments are also presented.