The Beville Manufacturing Case: Using Factory-simulation Software to Teach the Concepts of Activity-based Costing and Nonfinancial Performance Measures

The focus of much recent accounting research has been the changing manufacturing environment facing the management accountant. The evidence suggests that manufacturing technology is changing at a rapid pace; therefore, accounting educators must seek new and innovative ways to help students grasp the complexities of what has been termed the “new manufacturing environment.” Describing the dynamics of an operating factory is a major challenge facing the accounting professor because many (most) students accounting or nonaccounting, graduate or undergraduate have not seen a factory in operation. In the spirit of the “Bedford Report” issued by the American Accounting Association Committee on the Future Structure, Content, and Scope of Accounting Education (1986) and the “Big Eight” white paper (Arthur Andersen & Co. et al., 1989), we use factory-simulation computer software to help students understand the complexities and interrelationships of a production facility.* The focus is on understanding complex relationships and integrating the physical manufacturing phenomena with accounting numbers and performance measures. As the simulation program executes, the students observe units flowing through the factory, scrap occurring, inventory levels rising and falling, downstream workcenters stopping because of lack of input from upstream workcenters, and both random and scheduled maintenance occurring. When the simulation period is complete, the computer package provides summary statistics illustrating throughput levels, scrap rates, utilization percentages, average work-in-process (WIP) levels, and downtime analysis. The