1.  2001 Prentice Hall Business Publishing, Accounting Information Systems, 8/E, Bodnar/Hopwood 14 - 1 Management Decision Making and Reports Chapter 14 l Planning and control are fundamental activities common to all managers. l All planning and control activities involve decision making. Planning and Control

2.  2001 Prentice Hall Business Publishing, Accounting Information Systems, 8/E, Bodnar/Hopwood 14 - 2 Phases of the Decision-Making Process Define the Problem Define the Problem Identify the Relevant Alternatives Identify the Relevant Alternatives Evaluate Each Alternative Evaluate Each Alternative Select the Best Alternative Select the Best Alternative Implement the Selected Alternative Implement the Selected Alternative Follow Up with Analysis and Control Follow Up with Analysis and Control

3.  2001 Prentice Hall Business Publishing, Accounting Information Systems, 8/E, Bodnar/Hopwood 14 - 3 Useful Information for Planning and Control l Information differs from data in that information is useful to the decision maker, where data are not. l The timeliness of a report is important for control purposes, also : – quantifiability – accuracy – Conciseness (kepadatan) – relevance

4.  2001 Prentice Hall Business Publishing, Accounting Information Systems, 8/E, Bodnar/Hopwood 14 - 4 The Value of Information l The quality of information generally improves if the following conditions are met: – accuracy – timeliness – response time – completeness – relevance

5.  2001 Prentice Hall Business Publishing, Accounting Information Systems, 8/E, Bodnar/Hopwood 14 - 5 The Value of Information l What is a payoff?  Hasil  Manfaat yang dihasilkan dari keputusan. l An incremental increase in payoff is the value of information that yields this increase.

6.  2001 Prentice Hall Business Publishing, Accounting Information Systems, 8/E, Bodnar/Hopwood 14 - 6 The Value of Information l The following example assumes that a product costs $10 to make and sells for $15 and the production generates a 10% defective rate. l Also, if the product is sold and returned as defective, the producer incurs an additional $8 per unit handling cost, for a total loss on the defective unit of $18.

7.  2001 Prentice Hall Business Publishing, Accounting Information Systems, 8/E, Bodnar/Hopwood 14 - 7 The Value of Information $5 –$18 –$10 –$10 Defective Item Good Item State of Nature Action Sell Reject Hypothetical Payoff Matrix

8.  2001 Prentice Hall Business Publishing, Accounting Information Systems, 8/E, Bodnar/Hopwood 14 - 8 The Value of Information l What is the expected profit of selling each item as it is produced? l E (selling) = (0.9 × $5) + (0.1 × –$18) = $2.70 l What is the expected value of perfect information? l E (perfect information) = (0.9 × $5) + (0.1 × –$10) = $3.50 l $3.50 – $2.70 = 80¢ per unit. l The value of perfect information would be 80 cents per unit, less the unit cost of obtaining perfect information.

9.  2001 Prentice Hall Business Publishing, Accounting Information Systems, 8/E, Bodnar/Hopwood 14 - 9 Software for Decision Making l Database software allows managers to perform structured queries to obtain information in the database. l What is a query? l It is a request for information in the database.

10.  2001 Prentice Hall Business Publishing, Accounting Information Systems, 8/E, Bodnar/Hopwood 14 - 10 Software for Decision Making l Decision support systems (DSSs) refer to computer-based information systems that provide support to a decision-making process. l A DSS is oriented toward processing data. l DSSs respond quickly to the needs of a decision maker and are capable of answering what-if types of questions.

11.  2001 Prentice Hall Business Publishing, Accounting Information Systems, 8/E, Bodnar/Hopwood 14 - 11 Software for Decision Making l An expert system is a highly developed DSS that utilizes knowledge generally possessed by an expert to solve a problem. l An expert system is designed to emulate the knowledge and problem-solving techniques of a human expert l It consists of two parts: a knowledge base and an inference engine (alat pengolah masukan)

12.  2001 Prentice Hall Business Publishing, Accounting Information Systems, 8/E, Bodnar/Hopwood 14 - 12 Software for Decision Making l An executive information system (EIS) is software tailored to the strategic information needs of top management. l EIS provides top management with easy access to selective information that has been processed by the organization’s information system.

13.  2001 Prentice Hall Business Publishing, Accounting Information Systems, 8/E, Bodnar/Hopwood 14 - 13 Types of Reports Classification SchemeExamples PurposePlanning Control Operational Income taxes Stockholders PurposePlanning Control Operational Income taxes Stockholders Time horizon Long range Short range Historical Time horizon Long range Short range Historical

14.  2001 Prentice Hall Business Publishing, Accounting Information Systems, 8/E, Bodnar/Hopwood 14 - 14 Types of Reports Classification SchemeExamples ScopeFirmwide Divisionwide Departmentwide ScopeFirmwide Divisionwide Departmentwide OccurrenceUpon request Periodic Event-triggered One time OccurrenceUpon request Periodic Event-triggered One time Organizational functionProduction Sales Finance Inventory Organizational functionProduction Sales Finance Inventory

15.  2001 Prentice Hall Business Publishing, Accounting Information Systems, 8/E, Bodnar/Hopwood 14 - 15 Types of Reports Classification SchemeExamples Report formatMonitor Color graphics Computer printout Narrated Report formatMonitor Color graphics Computer printout Narrated ConcisenessBrief Testing plan Detailed Variance report ConcisenessBrief Testing plan Detailed Variance report

16.  2001 Prentice Hall Business Publishing, Accounting Information Systems, 8/E, Bodnar/Hopwood 14 - 16 Reporting Systems l Reporting systems can be classified as horizontal or vertical. l Horizontal reporting systems produce information for planning and control within related operational functions of the organization. l Horizontal reporting systems tend to focus on carrying out operational functions.

17.  2001 Prentice Hall Business Publishing, Accounting Information Systems, 8/E, Bodnar/Hopwood 14 - 17 Reporting Systems l Vertical reporting systems maintain the upward and downward flow of information. l These systems establish an information flow between the various levels of management. l Vertical reporting systems tend to emphasize planning and control.

18.  2001 Prentice Hall Business Publishing, Accounting Information Systems, 8/E, Bodnar/Hopwood 14 - 18 The Financial and Cost Reporting Systems l The main objective of financial accounting systems is to produce stewardship reports (laporan pertanggungjawaban) for the company’s owners and creditors.

19.  2001 Prentice Hall Business Publishing, Accounting Information Systems, 8/E, Bodnar/Hopwood 14 - 19 The Financial and Cost Reporting Systems l The cost accounting reporting system often has the objective of providing numbers for cost of goods sold and finished goods to be used in the financial reporting system. l There are two main types of traditional cost accounting systems? 1 Job order 2 Process costing

20.  2001 Prentice Hall Business Publishing, Accounting Information Systems, 8/E, Bodnar/Hopwood 14 - 20 The Financial and Cost Reporting Systems l Job order systems are applicable to industries where customer orders are made on a custom basis. l In industries where goods are mass-produced, a process costing reporting system in normally used.

21.  2001 Prentice Hall Business Publishing, Accounting Information Systems, 8/E, Bodnar/Hopwood 14 - 21 Responsibility Accounting l What is responsibility accounting? l The concept of responsibility accounting states that all events that occur within a company’s environment can be traced to the responsibility of a particular individual. l Responsibility accounting systems are typically able to allocate costs to the relevant responsibility center.

22.  2001 Prentice Hall Business Publishing, Accounting Information Systems, 8/E, Bodnar/Hopwood 14 - 22 Responsibility Accounting VP Sales President VP Manufacturing Division Manager Plant Manager

23.  2001 Prentice Hall Business Publishing, Accounting Information Systems, 8/E, Bodnar/Hopwood 14 - 23 Responsibility Accounting Plant Manager Dept. Manager Supervisor Worker

24.  2001 Prentice Hall Business Publishing, Accounting Information Systems, 8/E, Bodnar/Hopwood 14 - 24 Responsibility Accounting l A very important application of responsibility accounting is the investment center concept. l Investment center reporting shows the contribution margins controllable by division managers. l Profitability reporting involves a system of budgets and control reports.