,ACCOUNTING INFORMATION SYSTEM 2ND EDITION BY
VERNON RICHARDSON,JANIE CHANG, RODNEY SMITH
SOLUTION MANUAL
Chapter 1 – Accounting Information Systems and Firm Value
Multiple Choice Questions
1. c
2. d
3. a
4. c
5. d
6. b
7. d
8. a
9. d
10. b
11. b
12. c
13. a
14. c
15. a
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!
..
1
,The cost of electricity per operating hour each month of the year.
..
2
, Richardson, Chang, Smith – Accounting Information Systems, 2nd Edition – Chapter 1
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
..
3
VERNON RICHARDSON,JANIE CHANG, RODNEY SMITH
SOLUTION MANUAL
Chapter 1 – Accounting Information Systems and Firm Value
Multiple Choice Questions
1. c
2. d
3. a
4. c
5. d
6. b
7. d
8. a
9. d
10. b
11. b
12. c
13. a
14. c
15. a
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!
..
1
,The cost of electricity per operating hour each month of the year.
..
2
, Richardson, Chang, Smith – Accounting Information Systems, 2nd Edition – Chapter 1
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
..
3
