Abstract Cost allocations present one of the most challenging topics instructors must teach in cost/managerial accounting courses. A primary reason for this is that students typically do not comprehend fully the behavioral implications inherent in situations which offer choices among different acceptable accounting methods. This article describes how an instructor might use a real-world-based exercise to bring to life the behavioral concerns inherent in cost allocation accounting choices. Using an actual company's joint cost data and classroom role-playing, students discover for themselves that their choice of an allocation method normally is contingent upon the company role they are asked to assume. For many of them, these choices are in sharp contrast to the normative choice they made prior to being assigned a specific company role and seeing the allocated dollar amounts. Brief discussions of cost allocations and role-playing are presented, suitable to introduce students and faculty, respectively, to the primary issues involved in both. In addition, the exercise materials are presented along with a recapitulation of our experience in using them in a fourth-year undergraduate cost accounting class.
Haskins et al. (Tue,) studied this question.