Solutions – Chapter 1
Discussion Questions
1. Brainstorm a list of discretionary information that might be an output of an
accounting information system and be needed by Starbucks. Prioritize which items
might be most important and provide support.
Answers will vary. Here are some potential answers:
The cost of a cup of coffee, by type: Breakfast blend, Cafe estima, caffe Verona,
espresso roast, Ethiopia sidamo, french roast, Gold coast blend, Guatemala Antigua,
house blend, Italian roast, Kenya coffee, komodo dragon blend, organic Serena blend,
organic shade grown Mexico, sumatra, decaf caffe Verona, decaf espresso roast, decaf
house blend, and decaf Sumatra!
Monthly Sales per square foot of retail space.
Employee cost for each operating hour.
Advertising expenditures per dollar of sales.
The cost of condiments per dollar sales of coffee. Condiments might include
sweeteners, liquid creamers, cream canisters, sugar packets, sugar canisters, stir
sticks!
The cost of electricity per operating hour each month of the year.
2. Explain the information value chain. How do business events turn into data then
into information and then into knowledge? Give an example starting with the
business event of the purchase of a DVD at Best Buy all the way to useful
information for the CEO and other decision makers.
The information value chain represents the overall transformation from a business
need and business event (like each individual sale of U.S. flag) to an ultimate
decision. The information value chain might be represented considering the
purchase of a DVD at Best Buy in the following way:
The DVD will be recorded as sales revenue and then after deducting its costs will
add to or subtract from corporate income. The cash from the DVD sale will also add
to the operating cash flows.
The specific DVD will be recorded in the information as a sale to monitor which
DVDs are selling within Best Buy. This will help Best Buy and its suppliers know
which DVDs are selling and which type of DVDs should be reordered. The type of
DVD will also help the marketing department better understand its customers and
their respective demographic profile to better market to them.
, In addition, knowing the location of the DVD sale will also help decision makers
know where its sales are occurring.
The CEO can look at the profitability of DVDs overall, the specific types of DVDs that
are selling and the location of those sales all due to the information value chain.
3. Give three examples of types of discretionary information at your college or
university and explain how the benefits of receiving that information outweigh the
costs.
Answers will vary. This represents a potential answer.
Universities are often interested in their freshmen retention (the percentage of
sophomores that return after their freshman year). They also quite interested in
their four- or five-year graduation rates.
Universities are also interested in their production of research grants. This is often
used to monitor the success of their research and their ability to get interested
sponsors (such as the National Institute of Health or the National Science
Foundation).
Information for each of these three examples can be gained by the information
system at the university. However, a university generic information system does
not usually offer this information as a standard report or standard output of the
system. Therefore, work must be done to capture (and potentially digitize) this
information, ensure its validity and then report it in an appropriate useful format.
The cost of getting useful information will depend on the university and its
technology. However, since these represent three keys metrics of a university and
will likely be used as a key input to manage the university, the benefits will
potentially outweigh those costs.
4. After a NBA basketball game a box score is produced detailing the number of points
scored, assists made and rebounds retrieved (among other statistics). Using the
characteristics of useful information discussed at the beginning of the chapter,
please explain how this box score meets (or does not meet) the characteristics of
useful information.
A box score of a NBA basketball game (or other sports) produces overall team
statistics by half and quarter and details player performance including minutes
played, shots taken, shots made, free throw shots taken and made, assists, rebounds,
steals, blocks and fouls.
To be relevant, the information must potentially impact a decision that a decision
maker must make. Relevant information is usually characterized by having
, predictive value, feedback value and receiving it on a timely basis. This information
provides feedback value to explain how players performed in the game. The box
score provides predictive value to the extent that prior performance (as reflected in
the box score) is predictive of future performance. Since box scores are available
immediately following the game, it is also received on a timely enough basis to make
decisions for a subsequent game.
To be reliable, the information must be verifiable, be representationally faithful and
be neutral. There are often some allegations that the statistics included in a box
score is affected by the bias of the scorekeeper. While the actual points scored by
the team is verified by the officials, more minute details are not verified and may be
subject to bias, thus limiting their reliability.
The information is potentially relevant to the coach in helping to figure out which
players are most efficient and productive. Which players play well against different
teams and which players are good at particular aspects of offense and defense,
among others.
5. Some would argue that the role of accounting is simply as an information provider.
Will a computer ultimately completely take over the job of the accountant? As part
of your explanation, explain how the role of accountants in information systems
continues to evolve.
Accountants have a role as a business analyst. That is, they gather information to
solve business problems or address business opportunities. They determine what
information is relevant in solving business problems, then create or extract that
information and finally analyze the information to solve the problem. An AIS
provides a systematic means for accountants to get needed information and solve a
problem.
While a computer is very good at reliably collecting, processing and producing
information, the role of the accountant when serving as a business analyst will
continue to be able to assess the problems the business is facing and work to
provide information that will address it.
6. How do you become a Certified Information Technology Professional (CITP)? What
do they do on a daily basis?
A CPA can earn a CITP designation with a combination of business experience,
lifelong learning and an optional exam.
The CITP designation identifies accountants (CPAs) with a broad range of
technology knowledge and experience. On a daily basis, CITPs may help devise a
more efficient financial reporting system, help figure out how an information system
, can provide needed decision-relevant information, help the accounting function go
paperless or consult on how an IT function may transform the business.
7. Explain the value chain for an appliance manufacturer, particularly the primary
activities. Which activities are most crucial for value creation (or in other words,
which activities would you want to make sure are the most effective)? Rank the five
value-chain enhancing activities in importance for an appliance manufacturer.
The value chain goes all the way from product design, through sourcing to
manufacturing to shipping the final product to the warranty and repair business. I
would consider the product design, which ensures that the appliance has the
desired functionality at the right priced points, to be a critical activity for value
creation. Sourcing the product components to low cost, yet high quality component
providers is also key to creating value. Final assembly (or operations) of the
product components is also key to ensuring high product quality at reasonable
prices. Marketing the final product through appropriate distribution channels and
supporting the final product through the warranty and repair process also are
crucial parts of the value chain.
My opinion of the ranking of the five primary activities would be that product design
would be the most important, then sourcing (inbound logistics), then marketing,
then warranty and repair and finally final assembly (or operations).
8. Which value chain supporting activities would most be most important to support a
health insurance provider’s primary activities? How about the most important
primary activities for a university?
Of course, all of the supporting activities are important. Human Resources perhaps
can be viewed as most important to make sure the right nurses and right doctors
with the appropriate skills are available at the right time to service the sick and
injured. Technology is increasingly becoming an important part of hospitals,
especially with the digital medical records are becoming increasingly available and
useful. Certainly, other arguments can be made for other supporting activities.
The primary activities of a university would be to attract students, educate them and
then helping them find a good job once they have graduated. Educating students is
probably the most important primary activities in the university as that is its
primary mission.
9. List and explain three ways that an AIS can add value to the firm.
Accounting Information Systems add value by providing decision relevant
information to management.
Three specific examples would include the following: Customer relationship
management (CRM) techniques could attract new customers, generating additional
sales revenue. Enterprise systems can significantly lower the cost of support
processes included. Supply Chain Management Software allows firms to carry the
right inventory and have it in the right place at the right time.
Discussion Questions
1. Brainstorm a list of discretionary information that might be an output of an
accounting information system and be needed by Starbucks. Prioritize which items
might be most important and provide support.
Answers will vary. Here are some potential answers:
The cost of a cup of coffee, by type: Breakfast blend, Cafe estima, caffe Verona,
espresso roast, Ethiopia sidamo, french roast, Gold coast blend, Guatemala Antigua,
house blend, Italian roast, Kenya coffee, komodo dragon blend, organic Serena blend,
organic shade grown Mexico, sumatra, decaf caffe Verona, decaf espresso roast, decaf
house blend, and decaf Sumatra!
Monthly Sales per square foot of retail space.
Employee cost for each operating hour.
Advertising expenditures per dollar of sales.
The cost of condiments per dollar sales of coffee. Condiments might include
sweeteners, liquid creamers, cream canisters, sugar packets, sugar canisters, stir
sticks!
The cost of electricity per operating hour each month of the year.
2. Explain the information value chain. How do business events turn into data then
into information and then into knowledge? Give an example starting with the
business event of the purchase of a DVD at Best Buy all the way to useful
information for the CEO and other decision makers.
The information value chain represents the overall transformation from a business
need and business event (like each individual sale of U.S. flag) to an ultimate
decision. The information value chain might be represented considering the
purchase of a DVD at Best Buy in the following way:
The DVD will be recorded as sales revenue and then after deducting its costs will
add to or subtract from corporate income. The cash from the DVD sale will also add
to the operating cash flows.
The specific DVD will be recorded in the information as a sale to monitor which
DVDs are selling within Best Buy. This will help Best Buy and its suppliers know
which DVDs are selling and which type of DVDs should be reordered. The type of
DVD will also help the marketing department better understand its customers and
their respective demographic profile to better market to them.
, In addition, knowing the location of the DVD sale will also help decision makers
know where its sales are occurring.
The CEO can look at the profitability of DVDs overall, the specific types of DVDs that
are selling and the location of those sales all due to the information value chain.
3. Give three examples of types of discretionary information at your college or
university and explain how the benefits of receiving that information outweigh the
costs.
Answers will vary. This represents a potential answer.
Universities are often interested in their freshmen retention (the percentage of
sophomores that return after their freshman year). They also quite interested in
their four- or five-year graduation rates.
Universities are also interested in their production of research grants. This is often
used to monitor the success of their research and their ability to get interested
sponsors (such as the National Institute of Health or the National Science
Foundation).
Information for each of these three examples can be gained by the information
system at the university. However, a university generic information system does
not usually offer this information as a standard report or standard output of the
system. Therefore, work must be done to capture (and potentially digitize) this
information, ensure its validity and then report it in an appropriate useful format.
The cost of getting useful information will depend on the university and its
technology. However, since these represent three keys metrics of a university and
will likely be used as a key input to manage the university, the benefits will
potentially outweigh those costs.
4. After a NBA basketball game a box score is produced detailing the number of points
scored, assists made and rebounds retrieved (among other statistics). Using the
characteristics of useful information discussed at the beginning of the chapter,
please explain how this box score meets (or does not meet) the characteristics of
useful information.
A box score of a NBA basketball game (or other sports) produces overall team
statistics by half and quarter and details player performance including minutes
played, shots taken, shots made, free throw shots taken and made, assists, rebounds,
steals, blocks and fouls.
To be relevant, the information must potentially impact a decision that a decision
maker must make. Relevant information is usually characterized by having
, predictive value, feedback value and receiving it on a timely basis. This information
provides feedback value to explain how players performed in the game. The box
score provides predictive value to the extent that prior performance (as reflected in
the box score) is predictive of future performance. Since box scores are available
immediately following the game, it is also received on a timely enough basis to make
decisions for a subsequent game.
To be reliable, the information must be verifiable, be representationally faithful and
be neutral. There are often some allegations that the statistics included in a box
score is affected by the bias of the scorekeeper. While the actual points scored by
the team is verified by the officials, more minute details are not verified and may be
subject to bias, thus limiting their reliability.
The information is potentially relevant to the coach in helping to figure out which
players are most efficient and productive. Which players play well against different
teams and which players are good at particular aspects of offense and defense,
among others.
5. Some would argue that the role of accounting is simply as an information provider.
Will a computer ultimately completely take over the job of the accountant? As part
of your explanation, explain how the role of accountants in information systems
continues to evolve.
Accountants have a role as a business analyst. That is, they gather information to
solve business problems or address business opportunities. They determine what
information is relevant in solving business problems, then create or extract that
information and finally analyze the information to solve the problem. An AIS
provides a systematic means for accountants to get needed information and solve a
problem.
While a computer is very good at reliably collecting, processing and producing
information, the role of the accountant when serving as a business analyst will
continue to be able to assess the problems the business is facing and work to
provide information that will address it.
6. How do you become a Certified Information Technology Professional (CITP)? What
do they do on a daily basis?
A CPA can earn a CITP designation with a combination of business experience,
lifelong learning and an optional exam.
The CITP designation identifies accountants (CPAs) with a broad range of
technology knowledge and experience. On a daily basis, CITPs may help devise a
more efficient financial reporting system, help figure out how an information system
, can provide needed decision-relevant information, help the accounting function go
paperless or consult on how an IT function may transform the business.
7. Explain the value chain for an appliance manufacturer, particularly the primary
activities. Which activities are most crucial for value creation (or in other words,
which activities would you want to make sure are the most effective)? Rank the five
value-chain enhancing activities in importance for an appliance manufacturer.
The value chain goes all the way from product design, through sourcing to
manufacturing to shipping the final product to the warranty and repair business. I
would consider the product design, which ensures that the appliance has the
desired functionality at the right priced points, to be a critical activity for value
creation. Sourcing the product components to low cost, yet high quality component
providers is also key to creating value. Final assembly (or operations) of the
product components is also key to ensuring high product quality at reasonable
prices. Marketing the final product through appropriate distribution channels and
supporting the final product through the warranty and repair process also are
crucial parts of the value chain.
My opinion of the ranking of the five primary activities would be that product design
would be the most important, then sourcing (inbound logistics), then marketing,
then warranty and repair and finally final assembly (or operations).
8. Which value chain supporting activities would most be most important to support a
health insurance provider’s primary activities? How about the most important
primary activities for a university?
Of course, all of the supporting activities are important. Human Resources perhaps
can be viewed as most important to make sure the right nurses and right doctors
with the appropriate skills are available at the right time to service the sick and
injured. Technology is increasingly becoming an important part of hospitals,
especially with the digital medical records are becoming increasingly available and
useful. Certainly, other arguments can be made for other supporting activities.
The primary activities of a university would be to attract students, educate them and
then helping them find a good job once they have graduated. Educating students is
probably the most important primary activities in the university as that is its
primary mission.
9. List and explain three ways that an AIS can add value to the firm.
Accounting Information Systems add value by providing decision relevant
information to management.
Three specific examples would include the following: Customer relationship
management (CRM) techniques could attract new customers, generating additional
sales revenue. Enterprise systems can significantly lower the cost of support
processes included. Supply Chain Management Software allows firms to carry the
right inventory and have it in the right place at the right time.
