Academic journal article Journal of the International Academy for Case Studies

Paper Airplanes, Inc.: Utilizing an In-Class Case to Demystify Process costing.(Instructor's Note)

Academic journal article Journal of the International Academy for Case Studies

Paper Airplanes, Inc.: Utilizing an In-Class Case to Demystify Process costing.(Instructor's Note)

Article excerpt


The primary subject matter of this case is the preparation of a basic process costing report using the weighted-average method. Secondary issues examined include understanding the physical flow of units in a processing environment, the notion of partially completed units, and the understanding of and accounting for equivalent units. The case has a difficulty level of two and is targeted at business students in a sophomore level managerial accounting course and/or MBA students in a graduate managerial accounting course. The case is designed to be taught in 1-2 class hours and is expected to require 1-2 hours of outside review by students following the class. This case is best administered in a class of 10 or more students.


Paper Airplanes, Inc. is a fictitious company organized to produce high-quality paper airplanes using aerodynamically superior paper and highly skilled labor. The company relies exclusively on college students for its labor and management pool. During a one hour class, students will be given an opportunity to "work" for the company by actually producing paper airplanes. Specifically, student volunteers are asked to assume roles as direct laborers, production supervisors, a materials (paper) manager, and, of course, cost accountants (all students). The basic production process is then explained to the class, and student volunteers are given quick training on their roles. Students will also see a few partially completed airplanes from the prior period and will be told that these need to be completed during the upcoming production period. After the training, student laborers will be given just two minutes to actually produce as many airplanes as they can and send (fly) them to the next department. When a production supervisor states that the time is up, the laborers will stop their production immediately. Production supervisors will count completed airplanes (those flown into the classroom), and then all students will assume the role of cost accountants to prepare a weighted- average process costing report. They will need to consider actual production during class and take into account such issues as partially completed airplanes and cost per equivalent unit. This hands-on, visual case is very instructive in its simplicity and ability to actively engage students in learning a challenging topic. Within a short class period, students will have actually participated in a production process and learned all the complexities and difficulties in preparing a basic process costing report.


Students have frequently expressed frustration and experienced difficulty understanding the complexities of process costing. Whereas the basic idea of a common product (i.e. cereal, canned peas) going through a series of processes to be finished is often readily understood by students, the cost accounting for departments is often challenging to visualize and, therefore, difficult to understand. This case is especially helpful in allowing students to see that materials and/or labor and overhead can be added at various stages of a production process, which in turn relates to a better understanding of the concept of equivalent units. Essentially, the case of Paper Airplanes, Inc. is a hands-on, visual learning exercise that is simple enough to complete in one class period, yet it successfully tackles the complexities of process costing.

The case involves some student volunteers actually producing a product (paper airlines) as if they were workers in a factory setting. Some students will act as direct laborers after some basic training. The materials manager will track and supply paper. One supervisor will track time. At least three production supervisors will count finished planes. They may recruit other helpers as needed. Some discrepancy may exist among the three supervisors regarding the count, but this can be resolved using a recount, average, or some other acceptable approach. …

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