Paratent Event Rentals Ltd.: The Job Costing Decision

Name: Paratent Event Rentals Ltd.: The Job Costing Decision (English version)
SKU: W24214

Matthew Sooy, Anthony Mastromarini

Product #:W24214

Supplier:Ivey

Discipline:Accounting

Setting:Canada, 2019

Details:Case (PDF) • 9 pages • 2022-02-09

Subjects:

Cost accounting Accounting methods Finance and investing Accounting

Geography:

North America Canada

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$9.71

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In 2019, Paratent Event Rentals Ltd. was facing the possibility of year end net losses. The co-owners of this Canadian business had recently invested in premium inventory, but a lackluster first quarter showed that they were not forecasted to get return on their investments. A new method of cost allocation was proposed to get Paratent back on track. When choosing between three conflicting future contracts, both the old and new methods of cost allocation needed to be implemented and considered. Using qualitative and quantitative analyses, Paratent needed to decide which job would be the most profitable and which cost allocation method to use in the future.

Learning Objectives

This case introduces job costing and builds upon cost allocation in a managerial accounting course. The case requires a basic understanding of managerial accounting principles and is best suited for upper-level undergraduate students and graduate students. After working through the case and assignment questions, students will be able to do the following:

Understand the concept of job costing and how it applies to a service-based industry.
Calculate job profitability using two cost allocation methods.
Compare and contrast two cost allocation methods and discuss which is more suitable for the business.
Analyze the implications of each cost allocation method on business decisions and the impact in defining the business’s ideal contract.