This project has been used in a managerial accounting course at the University of North Carolina at Pembroke to challenge students to master course objectives through a cumulative project. The project requires students to complete a series of four assignments that culminate in the preparation of a pro-forma income statement for a start-up company. The start-up company manufactures one product that is designed by the student.

At the beginning of the semester students are required to write a paragraph describing a product with at least three material components (See Managerial Project Assignments). The product should be unique or be a beneficial modification to an existing product. Assignments are graded, and suggestions are given to the students. Some students are required to rework their idea or submit a new product for various reasons such as impractical design or too similar a product already on the market. During the second assignment students use the Internet to search the US Patent and Trademark Office database for similar products. Students are required to print and submit abstracts of three similar products and develop a prototype or detailed specification drawing. Abstracts and prototype/drawings are reviewed, and students are given grades or asked to incorporate instructor suggestions.

At about midterm students are given the third assignment. Students are required to develop a standard cost for their product, including a Bill of Materials and an Operations Flow Document. Students develop an overhead budget and a predetermined overhead rate. Assignments are graded and returned. The final assignment requires the students to set a realistic selling price for their product. Students compare prices of similar products on the market or estimate a selling price through cost based mark-ups. Students develop a pro-forma income statement. Students assign demand for their product. Students can borrow up to one million dollars at a given percentage rate to finance their start-up company. Students summarize the feasibility of this product based on the pro-forma income statement and discuss any barriers to entry. If the pro-forma results in a Net Loss students are asked to detail what changes could be implemented to create Net Income

By the completion of this project students have a much better sense of how managerial accounting concepts are used in decision-making. Because the assignments are given throughout the semester no one assignment is overwhelming. Yet as a whole, these assignments add up to a good deal of work from the student. This approach of applied cumulative learning teaches students that any problem can be broken down into components. Students experience a challenge in this series of assignments. Most students enjoy using their creativity to develop a product and document the product costs as the product concept evolves into a company. Students seem to have a "stake" in their company, and a few consider marketing their products or developing home-based businesses.

From the instructor's prospective this project is time-consuming yet exhilarating. The grading involves determining the reasonableness of estimates, evaluating the analysis and making suggestions for changes. The project assignment grades are averaged with homework grades and counted as 25% of the overall course grade. This project gives instructors insight into student interests. Many students choose projects that relate to their hobbies or jobs. Products developed in previous semesters include a collapsible laundry basket to fit under a dorm room bed, a specialty tool for wallpaper, a mail notification device, a Velcro quilt attachment to cover an oven to prevent child burns, a foil liner to keep fast food fries hot, and a baseball practice mat. One student came to my office and said, "I have been at this University for three years, and this is the first assignment that I have truly enjoyed." Hopefully this assignment can be used to provide enjoyment and stimulate creative thinking in your managerial accounting course.