Customer accounting with budgets and activity-based costing: a case study in electronic commerce

This case study deals with an unexpected budgetary loss of an online wine trader. It can serve both as a discussion basis in class as well as an exam for advanced Master students in management, marketing, and accounting. The case illustrates how variance analysis and Activity-based Costing help managers to better understand the different profitability of customer groups in their portfolios. The rather open questions at the end of the case study allow for an adjustment to the level of knowledge of the students. They also serve the purpose to raise students’ awareness for the limits of customer accounting. Students will need to reflect on how a mechanical application of customer profitability analysis can lead to dysfunctional decisions that run counter to a company’s business model.