Chapter 13 Developing and Implementing Effective

Accounting Information Systems

Discussion Questions

13-1. Although some tasks in systems studies overlap, there are major differences between the planning, analysis, and design phases of such studies. The analysis phase involves organizing the system study team, perhaps hiring consultants, and making strategic plans for conducting the systems study. In a sense, the planning phase is continuous, since strategic planning is usually an iterative process. The major purpose of the analysis phase is to enable the study team members to familiarize themselves with a company's current system so that they can make recommendations for improving it. The systems analysis work includes understanding the goals of the current system, performing one or more surveys to acquire information about the company's present system, and generating possible solutions. The analysis phase leads directly to the design phase because the system planners use the information obtained in the analysis phase to design a new system. Therefore, the planning, analysis, and design phases all involve planning at increasing levels of detail. For example, the analysis phase provides a general design for a new system, while the design stage involves detailed design work for system development work. The major purpose of the design phase is to develop specific changes for a company's current system so that weak points can be minimized, if not eliminated. Thus, each phase draws on the information obtained in the prior phase.

13-2. Top managers appoint steering committees to oversee the work of an analysis and design team when it performs a systems study. Thus, a steering committee should be continuously involved in systems development work. The members of its committee should include top management personnel as well as one or more auditors. The role of the steering committee is to represent top management. Thus, its major tasks are to monitor, and interact with, a study team through all the phases of the systems study, and to facilitate communication between an organization’s managers and its study team(s).

In many organizations, a steering committee is also responsible for hiring consulting firms to perform systems studies. In such situations, the steering committee serves as an oversight committee that monitors the consultant’s progress and critically reviews its systems analysis reports. These reports enable the committee to consider the consultant’s findings and evaluate the solutions recommended by its team members for solving current system problems.

13-3. Student responses on this question are usually mixed, and it is possible to argue for any one of the three levels here. Some students feel that "general systems goals" are the most important to the effective operation of an organization's information system because such goals as “cost awareness,” “relevant output,” “simplistic structure,” and “flexible structure” are global in scope and create a framework for an organization’s entire information systems work. Without this framework, an organization’s information systems cannot function effectively.

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It is also possible to argue that "top management systems goals" are the most important to the effective operation of an organization's information systems because top managers are ultimately the individuals whom the systems must satisfy. This line of thinking in effect says that what is most important is what the top bosses say is most important. Then too, top managers also play an important role as supervisors of successful operational activities and top management's long-range planning and controlling functions are critical to organizational success. Furthermore, top management requires a large variety of decision-making information.

Unless the study team gives careful thought and consideration to top management's systems goals, the likelihood of an effective information system will be small. In addition, the systems goals of operating management for the coming year are difficult to develop without taking into consideration top management's systems goals. Finally, if top management's systems goals are not effectively satisfied, it is unlikely that operating management's systems goals could be effectively developed.

Finally, it is possible to argue that the most important goals to satisfy are “operating management system goals.” This argument rests on the notion that only operational goals are meaningful. For example, “providing managers with the right information” is a strategic objective which only becomes meaningful when it is restated as “provide Manager X with Payroll Report Y every Monday morning.”

13-4. The purpose of a feasibility evaluation is to determine whether or not a specific new or modified system is technically, operationally, schedule, legally, and economically feasible—i.e., that the system is justifiable and practical in each of these five areas. For this reason, the feasibility evaluation should precede the preparation of a systems specifications report because the data for this report comes from the findings of the feasibility evaluation work (as well as the findings from the detailed systems design work). A systems specifications report should be prepared for only those system designs that are totally feasible—i.e., technical, operational, schedule, legal, and economic feasible.

13-5. This question requires students to imagine what cash benefits and costs an organization might incur when creating an online ordering system. We outline potential benefits and costs below.

Note to Instructor: Most students cannot imagine that everything isn’t already computerized and online. However, if you think about such simple applications as address books, recipe files, stamp or doll collections, or the businesses of struggling mom-and-pop shops, manual applications still abound. Before discussing this problem, therefore, it might be interesting to ask the class what manual or non-online applications they can think of.

Potential cash benefits: a) Reduced clerical errorsb) Increased ability to generate customized sales reports c) Reduced costs of creating and distributing managerial reportsd) Reduced clerical costs and paper usagee) Round-the-clock customer ordering capabilitiesf) Reduced lost sales and inconvenience caused by stock-outs g) Increased sales to both new and existing customers

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h) Ability to notify customers of shipping times or problems more quickly through collected email addresses

i) Better customer servicesj) Better market planningk) More efficient management control

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Potential cash costs (assuming inhouse provision of the online system)a) Computer hardware and software costsb) Costs to initially prepare the company's premises for the computer installation as well

as the additional site preparation costs and hardware upgrade costs required during the life of the system

c) Physical installation costsd) Employee training costse) Programming and maintenance costsf) Conversion costs g) Operational costs

13-6. Prototyping involves developing a skeletal software model, or prototype, of an accounting information system. Thus, the prototype is a scaled-down, experimental version of the information system desired by the company’s users. The users should experiment with the prototype and then provide feedback to the developers explaining what they like and dislike about the mockup model. Based on this feedback, the developers will modify the prototype model and again present it to the users for further testing and feedback. This iterative process of “trial use and modification” continues until the users are satisfied that the proposed system adequately meets their needs.

As explained in the text, prototyping works well when one or more of the following conditions are present: (1) system users do not understand their information needs very well, (2) system requirements are difficult to define and experimental designs are easier than with a live model, (3) the system to be developed is critical and needed quickly, (4) past interactions have resulted in misunderstandings between users and designers, (5) design mistakes are costly, or (6) the risks associated with developing and implementing the wrong system are high.

But prototyping is not always the best solution. As the chapter discusses, prototyping is not recommended when: (1) neither managers nor users trust it, (2) modification requirements are small or outputs and processing needs are already well-defined (many accounting applications fall into this category), (3) only a small subset of a large number of potential users are able to evaluate the model(s), or (4) the application itself, although large, is well understood—for example, a general ledger system—and developing a prototype merely duplicates the design work already deployed in existing software packages.

13-7. A system’s specifications report contains detailed information about each design proposal that meets the feasibility requirements of the company's system. The purpose of this report is to facilitate discussions between the design team and the new system’s developers or software vendor(s). But before a vendor can submit a specific system proposal to a client, it must first receive detailed descriptions of that company's information processing needs. The systems specification report provides this information. Regarding the second question, the data included in the systems specifications report differs substantially from the data collected or generated by the design team during its feasibility evaluation work. The systems specification report builds upon the feasibility evaluation data (as well as the detailed systems design work). When members of the design team perform their feasibility evaluation work, they do not normally analyze in detail the specifications of each system proposal. This detailed work is unnecessary because the purpose of the

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feasibility evaluation is to ascertain whether or not a new system is "totally feasible" for the client company. Only after the steering committee decides that the new system is totally feasible can the design team work on the detailed specifications. Some of the items included in the systems specifications report (that probably would not appear in a feasibility evaluation) are:

a) Historical background information regarding the client company's operating activitiesb) Detailed information about the problems in the client company's present data

processing system c) Detailed descriptions of the consultants’ (or study team’s) systems design proposalsd) Indication of what the consultants expect the computer vendors to include in their

proposals to the client companye) Request for a time schedule from vendors or system developers concerning their

implementation of a new system into the client company

13-8. When establishing controls, an implementation team should also design effective audit trails, develop general and application controls for the new computerized system, and create good documentation for the system. Because these controls will affect both the form and content of a company's computer files, the team should create and implement these controls before converting accounting data files to alternate formats.

13-9. Under direct conversion, the organization immediately discontinues using its old system as soon as the new system is installed. Direct conversion may be appropriate when (1) there are many weaknesses in the old system and almost any change is likely to be an improvement, (2) there are only minor or simple revisions to the company's current system, (3) well-tested PC software or hardware is acquired and only a small number of users are involved, or (4) there are drastic differences between the new system and the old system. Compared with parallel or modular conversion, the major advantages of direct conversion are (1) cost, and (2) time savings. Direct conversion saves costs because it is relatively inexpensive—the changeover is immediate. Direct conversion saves time because no time is lost between the changeovers from one system to another. The major disadvantage of direct conversion is the possibility that the new system does not function well after it is implemented. This can be very disruptive, costly, and even fatal.

Under parallel conversion, an organization operates both its old system and its new system simultaneously for a certain period of time in order to test the new system and compare outputs. The implementation team will investigate differences and either request or make revisions in the new system as required. The major advantage of parallel conversion is that it protects a company’s business processes if the new system does not work properly or fails completely. The major disadvantage of parallel conversion is cost. Because both the old and the new system will process almost all of its accounting transactions throughout the conversion period, organizational facilities and personnel must handle the double-processing workload. This usually leads to overtime work and other extra costs.

Under modular conversion, an implementation team decomposes an AIS into smaller units or “modules.” The implementation team then installs the new system "piecemeal" for the specific units associated with the activity. As individual modules are successfully tested and installed, further units are then implemented and tested until the entire system is successfully implemented. The major advantage of modular conversion, therefore, is that the team can identify specific problems early and correct them before implementing the remainder of the

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system. Because the implementation process takes place on a step-by-step basis, there is a high probability that the complete system will function well. The major disadvantage of modular conversion is that it takes a long time to complete the entire implementation process, thus increasing organizational costs.

13-10. Both Gantt charts and PERT network diagrams are useful tools for scheduling, monitoring, and managing the activities required to implement a new accounting information system (see Figures 13-11 and 13-12 of the text). Of the two, PERT is the more important project management tool. It allows project leaders to plan complex implementation projects, estimate the completion times of these projects, identify the activities on critical paths, and examine “what-if” scenarios in which managers reallocate project resources from some activities to others. Gantt charts are simpler and easier to understand, but they do not indicate the precedence relationships between the various activities as do PERT network diagrams. For this reason, project managers are more likely to use Gantt charts for simple applications, or to illustrate actual-versus-planned completion times of the activities in larger PERT projects.

13-11. When an organization installs a new accounting system, its managers hope that it will eliminate all the old problems and not create new ones. However, as the new system operates on a day-to-day basis, some of the company's original systems problems may reoccur or new problems may develop. The purpose of the follow-up phase of a systems study is to evaluate the new system and determine what problems still exist.

A new system should help a company achieve its general systems goals, top management systems goals, and operating management systems goals. Through follow-up analysis work, an implementation team attempts to identify those goals that the new system does not help management achieve. Systems revisions will then be required in these areas. Similarly, new revisions may be needed due to internal and/or external environmental changes, or because the new system no longer provides the types of information required by the company's management.

Some specific examples of follow-up work are:

1) Determine whether top management and operating management are satisfied with both the content and the timeliness of the output reports received from the information processing subsystem

2) Evaluate the system controls of the system to ensure they function properly3) Observe employee work performances to determine if the new system helps them

perform their assigned job functions effectively4) Determine whether processing functions are performed adequately, and also if output

schedules for both internal and external reports under the new system are met5) Talk with local area network users to determine these users’ satisfaction with the

information they are accessing from the network6) Test computer security, privacy, and confidentiality controls to ensure that the new

system meets or exceeds expectations in this area

The implementation team will prepare a follow-up review report at the end of its follow-up work, which it then submits to the company’s steering committee. It is up to the steering committee to decide what to do next.

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13-12. Three major ways that an organization can acquire software are: (1) by acquiring or leasing it from one or more independent vendors, (2) by developing the software in-house, and (3) by outsourcing the data processing tasks required by the system. Technically, however, this last option more refers to accomplishing system tasks than acquiring software.

Rather than reinvent the wheel, most organizations obtain their operating systems, communications, and utility program software from outside vendors. The one remaining type of software is application software. When a company has very specific data processing requirements and no available commercial software can satisfy its needs, an organization typically has no choice but to write its own. However, this advantage of “in-house development” also carries over even when commercial software is available—i.e., the fact that the software is customized to meet the organization's specific processing requirements.

Because vendor software is usually written for a larger market, it may require considerable modifications to satisfy the organization's data processing needs. The counter argument is that canned software typically costs much less than custom-developed software, and thus, the question is usually whether the costs of purchasing or leasing the initial software, plus the modification costs, are still cheaper than the in-house development alternative.

Which approach is better? Depending upon their individual experiences, some students may prefer to acquire software from an independent vendor whereas other students will favor in-house development. Those students recommending an independent vendor for the acquisition of software often give "lower cost" as the major reason for favoring the independent vendor over the in-house development, but this is not always so. It depends upon the specific software needs of the organization. As a practical matter, however, most companies today prefer to purchase existing software than develop their own. Also, as we noted in earlier chapters, existing software typically incorporates “best practices,” which often requires companies to reengineer some of their processes. While this represents a cost in terms of time and money, successful BPR initiatives can sometimes reap significant advantages for companies over the long run (i.e., in terms of cost savings due to more efficient and effective processes).

13-13. Business process outsourcing (BPO) means just that—outsourcing the tasks required to perform a specific business function. An example is preparing the weekly company payroll. Typically in such circumstances, the vendor uses its own software, labor, and materials to perform the job. “Knowledge process outsourcing” (KPO) means hiring an outside vendor to perform a knowledge-oriented task. An example is developing software according to client specifications or performing a particular research task.

Companies outsource business processes, such as back-office accounting functions, for a variety of reasons. As noted in the text, the number one reason companies outsource is “cost.” Globalization means that any company anywhere in the world may contract with anyone, located anywhere, to perform the required work. Because labor rates vary around the globe, labor-intensive tasks that may be done more cheaply elsewhere have the potential for outsourcing. Other reasons mentioned in the textbook include convenience, the ability to depend upon an outside vendor to handle large changes in processing volume, the availability of expertise not found in-house, and relief from the pressures of keeping current with technology.

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Problems

13-14. The Chris Hall Company

(a) Information needs of a production plant supervisor: 1) Estimates of periodic requirements (weekly, monthly, etc.) of different types of wine in

order to develop periodic production schedules 2) Comparisons of production activities relative to the capacity of production equipment to

identify periods when there will be idle plant capacity or overtime work required 3) Information concerning quantities of raw materials needed for manufacturing so that

managers can ensure adequate supplies of these materials will be on hand for production

4) Information regarding labor requirements for production so that adequate personnel will be available to meet production schedules

5) Cost reports reflecting variances of actual production costs in comparison to budgeted and standard production costs so that corrective action can be initiated on those production costs that vary significantly from the budget and standard cost data

(b) Information needs of top management: 1) Information regarding competitors’ activities (e.g., competitors’ introduction of new

products) and any price and quality changes anticipated or already initiated for competitors present products and how these changes are likely to affect the company's current share of the market

2) Estimates of the company's long-range market potential for each of its product lines 3) Information on the future economic outlook for the country and how the company's

future sales will be affected by inflation, unemployment, etc. 4) Projected cost and revenue data associated with wine production and sales in order

that long-range budgetary planning can be performed5) Information on long-term trends in wine consumption both domestically and

internationally6) Information on competing beverages such as beer

(c) Marketing manager: 1) Forecasts of expected sales by product line for the coming budget year 2) Information regarding the contribution margin of each product line so that an optimal

sales mix can be developed 3) Information regarding production capacities of the manufacturing plant so that

managers can determine the ability of the plant to manufacture adequate inventory quantities to meet the anticipated sales mix in the coming budget year

4) Information regarding the effectiveness of various advertising efforts for stimulating demand for the company's products (this information may lead to changes in various promotional endeavors)

5) Information comparing the actual sales to budgeted sales by both product lines and sales personnel; this information can be reported on a management-by-exception basis

13-15. Lilly Li Apparel

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Note to Instructor: This problem asks students to identify four problems with the system. Here are six of them.

Problems Remedies

1. New cashiers are awkward in their use of the POS system.

1. Conduct POS training for new cashiers.

2. Printing sales tickets seems to take too long.

2. Replace the existing printers with faster models, or speed the processing of sales transactions leading to the printing.

3. Automatic opening of the cash drawers is erratic.

3. Test the voltages sent to the cash drawers under PC control and adjust them to give predictable responses.

4. The four-digit STN is inadequate for the number of merchandise items, resulting in frequent dumps of information for discontinued items to make room for new items.

4. Add one or more digits to the STN field in all files, reorganize databases, and/or recompile programs (if necessary) for the new STN size, and reload existing STN files. Even better: use automated scanners that eliminate manual keying.

5. Customers become impatient with the long credit approvals.

5. Install electronic credit card verifiers that read the customer’s credit card number and automatically dial the credit card approval service for authorization. Alternately, or in addition, automatically approve credit-card purchases under a set limit—for example, $25.

6. All sales cease when the store server is down.

6. Implement procedures that permits the POS system to ring up sales independent of the computer by:a) Continue to accept sales for cash, but

manually record transactions for later computer input

b) Maintaining an automated backup server or generator

c) Creating a program disk that can be used to restart the PCs and a data disk containing the STN file

d) Having cashiers load the program when the computer fails

e) Having the computer retrieve PC-controlled sales when the computer returns to operation

13-16. AAZ Consulting Firm

Here are areas where an online, real-time computer system might help the managerial decision making for a professional football team:

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a) The system could be useful in maintaining up-to-the minute counts of attendance

during game days as well as counts by category, e.g., general admission, box seats, VIP, complimentary, etc.

b) The system would be able to take ticket orders for future games—an important capability if seats for a certain future game were limited and there were several sales centers for such seats scattered about the ball park or the city.

c) For such sports teams as baseball, basketball, and football, the system could be useful in simulating various game-playing situations that could happen during a game and providing statistics about the success of each outcome.

d) For all types of athletic teams, the system could help maintain current inventory records for such critical items such as medical and athletic supplies that are needed by the team.

e) For all types of athletic teams, a real-time system could be useful to aid the projections of future attendance at games and to help forecast future cash flows as well as other budgetary activities (such as forecasts of future capital expansion).

f) For professional baseball, basketball, and football teams that draw heavily upon college graduates when seeking new players, the system could provide current information about each year's available college graduates as well as future college graduates and their unique qualifications. Also, the computer system could maintain information about which players have already been signed to contracts by other teams, which individuals are still free agents, and which teams are competing for these free agents.

13-17. Cook Consultants

Students typically don’t like May’s suggestion. True, implementing the new system on time is important, and can probably be completed much faster under “direct conversion” than “parallel conversion.” However, meeting this date at the expense of installing an inefficient or untested system should normally be avoided. Because The Samuel Company is making major changes to its system, there is a strong likelihood that various problems may occur. “Direct conversion” means that the old system will be discontinued immediately after the new system is implemented. If problems occur with the new system, these problems may be costly, such as losing customers, wasting employee time, and will normally be more difficult to solve if the old system is gone. Furthermore, a company can have serious difficulties maintaining accurate data files if only the new system is operative and problems with the new system corrupt the data in these files.

Under parallel conversion, both the old system and the new system operate simultaneously for a period of time until managers believe the new system is free of errors. The problem with parallel conversion is that it takes more time than direct conversion. However, the likelihood is much greater that, under parallel conversion, the new system will operate more efficiently and effectively. For these reasons, parallel conversion should be used even though it may delay the systems implementation schedule.

13-18. A preliminary Investigation

Although this problem is open-ended, the authors have had great success encouraging students to examine the information system of specific companies and requiring them to report their findings in class. One common difficulty is the fact that the study of even the smallest

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systems tends to be a large and complex undertaking. This is a useful lesson, however, for understanding “scope creep,” and certainly points out the difference between in-class theory and real-world practice. As a practical matter, however, instructors should urge their students to look at very simple systems in very small companies.

13-19. Understanding PERT Charts

a. Only activity B must be completed before activity C can begin. b. Both activities E and F must be completed before activity G can begin. In turn, activity E

requires activity A and activity F requires activity B.c. Activity J requires the immediate completion of activities I, G, and D before it can

commence. Indirectly, activity J requires the completion of all the other activities before it can begin.

d. The five paths through the network (and their completion times) are: (1) AEHIJ (55), (2) AEGJ (50), (3) BFHIJ (58), (4) BFGJ (53), and (5) BCDJ (48). The critical path is BFHIJ because it is the longest path through the network.

e. Activity F can only begin after the company completes activity B. If Activity B requires 14 weeks to complete, then activity F can begin at the beginning of week 15.

f. The two paths leading to activity G are AE (requiring 18 weeks) and BF (requiring 21 weeks). Because activity G requires the completion of both activities E and F, the earliest start time for activity G is the beginning of week 22.

g. From Part (d) of this question, we know that the entire project can be completed in 58 weeks. If activity J requires 26 weeks to complete, then we can subtract 26 from 58 to get “32.” This means that the latest start time for activity J is at the end of week 32, or the beginning of week 33.

h. This part of the problem continues part (g). We know that activity J must start no later than the beginning of week 33. Because activity G requires 6 weeks to complete, we can subtract 6 from 33 to get “27.” Thus, the latest start time for activity G is the beginning of week 27.

i. From part (f) of this problem we know that the earliest start time for activity G is the beginning of week 22. From part (h) of this problem, we know that the latest start time for activity G is the beginning of week 27. Subtracting, we obtain the slack time for this activity: 5 weeks.

13-20. Understanding GANTT charts

a. Activity G (“convert data files”) is scheduled to begin at the beginning of week 22 and end 6 weeks later (the end of week 27).

b. Activity I (“test computer software”) is scheduled to begin at the beginning of week 28 and end 5 weeks later (the end of week 32).

c. The Gantt chart shows that the actual time to complete activity A (“prepare the physical site”) was 11 weeks. This was less than the 17 weeks originally planned for it.

d. The Gantt chart shows that the actual time to complete activity B (“determine the functional changes”) was 16 weeks. This was more than the 14 weeks originally planned for it.

e. Activity E (“acquire and install computer equipment”) can only begin after the company completes activity A. Because the company was able to complete activity A early (in 11 weeks), it can also begin activity E early—i.e., at the start of week 12.

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f. Activity C (“select and assign personnel”) can only begin after the company completes activity B (“determine the functional changes”). According to the Gantt chart, there was a delay in completing this activity, which was completed at the end of week 16. Thus, activity C can actually begin at the start of week 17.

Case Analyses

13-21. Prado Roberts Manufacturing (What Type of Computer System to Implement?)

1. Four advantages of mainframe computer systems are: The available speed, power, and memory needed to perform the largest, most complex

tasks without the complexity and concerns of networks Multi-user capabilities, enabling hundreds or even thousands of users to access the

same computer and files simultaneously The mainframe programs, partially because they have existed for a long time, are

debugged, and, therefore, cheaper than new microcomputer software A centralized computing environment leads to better control of applications, program

development, data files, computer operations, and quality standards with greater uniformity

Four disadvantages of mainframe computer systems are: Such systems may not be user friendly Such systems may require a high level of expertise to operate and require highly

trained, expensive IT staff There may be time delays in developing and implementing new systems as the

programs are complex New software for the mainframe may not be available, or may be expensive if it is

available

These advantages and disadvantages are likely to also apply to other manufacturing companies.

2. Factors and/or activities that prolong the lives of mainframe computer systems are: Systems that were originally developed in-house have now been debugged and work

properly The availability of parallel processing and emerging software capabilities The high cost of replacing customized systems

Two reasons why companies may not want to retire their mainframe computer systems are: These companies have enormous investments in mainframe platforms that would have

to be written-off on the financial statements Many users rely on mainframes to perform their most vital computing functions which

may require more memory, processing power, and data files than those available on microcomputers

Again, these factors are also likely to apply to other manufacturing companies.

3. Five advantages of microcomputer/client-server systems are:

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They are more user-friendly, thus, making it easy for employees to use They more easily meet rapidly changing business needs with new systems applications Microcomputers’ standalone capabilities allow users to continue to perform computer

tasks even if the host or server is disabled Microcomputers’ low acquisition and maintenance costs, which continue to decline over

time Many software applications are available in the marketplace

Two disadvantages of microcomputer/client-server systems are: The loss of central control. Security is more difficult relative to remote stations, the

server, and data files Personnel are tempted to use microcomputer work stations for personal purposes

These advantages and disadvantages also apply to Prado.

13-22. Wright Company (Analyzing System Reports)

Note to Instructor: In the solution below, the word “dysfunctional" refers to a negative contribution toward the company's operating efficiency and the word “functional” refers to a positive contribution toward the company's operating efficiency. 1. Indicate whether each of the four reactions cited in the text contribute positively or

negatively to the Wright Company’s operating effectiveness.

1) If the reports contain information that requires immediate attention, any delay in action is likely to be dysfunctional. If the reports continue to accumulate with no action taking place (e.g., the department heads do not catch up during the lulls), this definitely is dysfunctional behavior.

2) Generating too many reports or generating so many of them that managers take the wrong action is a dysfunctional response and a good example of information overload. The department heads were unable to assimilate the supplied information properly, and therefore they either did not use it or used it incorrectly.

3) Delaying action until reminded by someone can be dysfunctional. If delays continually

take place and result in complications and/or delays in other departments, this lack of action is dysfunctional.

4) Seeking information from external sources can be both functional and dysfunctional.

Gathering information from alternative sources can be dysfunctional because the formal system is not producing the information in a usable form and the process of developing information from other sources probably has a cost. However, the fact that the department heads generate needed information from other sources might be taken as a functional response to the problem.

2. For each negative reaction, recommend alternative procedures that the Wright Company

can employ.

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The dysfunctional behavior that occurred in Wright Company is most likely a direct result of management's failure to recognize that information systems are dynamic. Once a system is designed and implemented, it should be continually reviewed to acknowledge and incorporate any changes. It does not make sense to attack these problems piecemeal. Instead, a follow-up systems study committee composed of both systems staff and users should be established to review the present system and to interview users about their information needs and uses of the system’s outputs.

During the systems survey review, the committee should focus on the information needed by department heads, the content, form, and formats this information should take, and the timing of the information. Unnecessary reports should be eliminated, and individual reports should be redesigned to include only relevant information. Once revised, the reporting system should be reviewed periodically to make sure it is functioning smoothly and to make necessary corrections.

13-23. Kenbart Company (Redesigning Profit Plan Reports) 1-2. First, the most obvious addition is a date field at the top of the report that indicates the

day the report was created. This should help managers better identify individual reports and updates. Within the body of the report, the format for the account titles and their order of presentation in the first column will not change, and data will still be presented for both the current month and year-to-date. To help management review results and planning operations, however, we recommend that Kenbart add three new columns (“original,” “revised,” and “flexed revised”) under both the “Month” and the “Year-to-Date” headings as shown below. Furthermore, we recommend that the report include a “current outlook” column. An example of the revised format for the Profit Plan Report is shown below. Some additional notes are:

The Original Plan and Revised Plan columns are included for reference purposes. These two plans were the predecessor of the Flexed Revised Plan and may be useful in tracing changes.

The Flexed Revised Plan is the most current plan and is the one to which “Actual Results” should be compared. A comparison of Actual Results to this plan yields the Over/Under Plan calculations in dollar and percentage amounts.

The Current Outlook column was not included in the original report but has been added here and should give management an idea of what the results for the year are expected to be.

KENBART COMPANYPROFIT PLAN REPORT

DATE OF REPORT: xx/xx/xx

*_______ _____MONTH_____ _________* *____ _ YEAR-TO-DATE____________*

ACCOUNTTITLE

ORIGINALPLAN

REVISEDPLAN

FLEXED REVISED

PLANACTUAL

RESULTS

OVER/UNDER $ %

ORIGINALPLAN

REVISEDPLAN

FLEXEDREVISED

PLANACTUAL

RESULTS

OVER/UNDER

$ %CURRENTOUTLOOK

SALES

. .

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NET INCOME

13-24. Stephen Kerr Cosmetics (Point-Scoring Analysis)

Part I: Using Equal Weights

Fritz’s Ratings Meg's Ratings Fritz’s Ratings Meg's Ratings

Equal Vendor Vendor Vendor Vendor Vendor Vendor Vendor Vendor

Weights A B A B A B A B

Required modifications0.2 3 2 3 3 0.6 0.4 0.6 0.6

Ease of use0.2 8 3 4 6 1.6 0.6 0.8 1.2

Internal controls0.2 3 4 2 4 0.6 0.8 0.4 0.8

Flexibility0.2 4 5 3 7 0.8 1 0.6 1.4

Vendor support0.3 7 5 3 9 1.4 1 0.6 1.8

5 3.8 3 5.8

Fritz prefers Vendor A; Meg prefers Vendor B

SM 13.15

Part 2: Using New Weights

Fritz’s Ratings Meg's Ratings Fritz’s Ratings Meg's Ratings

Compromise Vendor Vendor Vendor Vendor Vendor Vendor Vendor Vendor

Weights A B A B A B A BRequired modifications

0.2 3 2 3 3 0.6 0.4 0.6 0.6Ease of use

0.3 8 3 4 6 2.4 0.9 1.2 1.8Internal controls

0.1 3 4 2 4 0.3 0.4 0.2 0.4Flexibility

0.1 4 5 3 7 0.4 0.5 0.3 0.7Vendor support

0.3 7 5 3 9 2.1 1.5 0.9 2.7

5.8 3.7 3.2 6.2Fritz still prefers Vendor A; Meg still prefers Vendor B

Part 3: Using Average Ratings:

Fritz’s Ratings Meg's Ratings Combined Weights Combined Results

Compromise Vendor Vendor Vendor Vendor Vendor Vendor Vendor Vendor

Weights A B A B A B A B

Required modifications 0.2 3 2 3 3 3 2.5 0.6 0.5

Ease of use 0.3 8 3 4 6 6 4.5 1.8 1.35

Internal controls 0.1 3 4 2 4 2.5 4 0.25 0.4

Flexibility 0.1 4 5 3 7 3.5 6 0.35 0.6

Vendor support 0.3 7 5 3 9 5 7 1.5 2.1

4.5 4.95

Vendor B has a slightly higher score now.

4. These exercises suggest that even the most “objective” numerical analyses are subject to such problems as assumptions, subjective ratings of underlying data, and compromises in choices if more than one person assigns ratings. They also suggest that important criteria may be omitted from the analyses—for example, the reputation of the vendor, the length of the support contract, the convenience or inconvenience of access to the vendors’ support staff or facilities, and the availability of off-shore help desk support.

SM 13.16