Christmas Inc. (A)

Santa Claus is facing increasing pressures to contain costs. The economic model that has worked for centuries is starting to show some cracks, to the point that he is considering outsourcing part of its toy production. Evaluating the bids his team collected from potential subcontractors, he realizes that it is not at all clear how much producing toys in house costs them. He then instructs his team to perform an analysis using different costing approaches, so that he could then make an informed decision about the future production process at Christmas, Inc. This case exposes students to alternative costing methods and stimulates a discussion of their appropriateness to different situations. Additionally, although the case is set in a fictional world, it proposes a setting where students can learn about make-or-buy decisions and practice the analytical tools that are required to support such a strategic decision.