Chapter 1 Management Information & Information Technology

8/10/2019 Chapter 1 Management Information & Information Technology

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Chapter 1

Management Information &

Information TechnologyIbrahim Sameer (MBA - Specialized in Finance,

B.Com Specialized in Accounting & Marketing)


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Management Information

The purpose of management information is to help

managers to manage resources efficiently &

effectively, by planning and controllingoperations & by allowing informed decision

making.


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Eg: A company wishes to launch a new product.

The companyspricing policy is to set the price at

total cost +20%. What should the price of theproduct be?


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In order to make the pricing decision, management

need information about the cost of the product.

The prime purpose of management informationis planning, control & decision making only.


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Planning

Planning involves establishing an objective or

identifying a problem and then choosing a

strategy to achieve the objective or alleviate theproblem.

Objective is the aim or goal of an organization.

A strategy is a possible course of action that

might enable an organization to achieve its

objectives.


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Decision making

Decision making mean choosing between

various alternatives. Decision making & planning

are linked: you decide to plan in the first place and

the plan you make is collection of decisions.


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The Qualities of Good


Good management information should be:

Accurate

Complete

Cost beneficial

User targeted

Relevant

Authoritative, Timely & Easy to use.


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Sources of Management

Information

There are many sources of management

information. Management information can come

from sources internal or external to the

organization & can be both financial and non-

financial.


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Information

The main internal sources of management

information within an organization include the

following:

Accounting records including the cost &

management accounts.

Personal records.

Production department records.


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Information

The main external sources of management

information within an organization include the

following:

Primary source of information is, as the term

implies, as close as you can get to the origin of

item of information: the eyewitness to an event, the

place in question, the document under scrutiny.


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Information

Secondary source, again logically enough,

provides second-hand information: books,

articles, verbal or written reports by someone else.


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Recording Management

Information

Financial accounts are prepared for individuals

external to an organization whereas management

account are prepared for internal managers of an

organization. There are a number of differences

between financial accounts & management

account.


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Recording Management

Information

Cost accounting produces information that is used

for both financial accounting & management

accounting.


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Financial Accounting & Cost &

Management Accounting


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Cost Accounts

Cost accounting and management accounting are

terms which are often used interchangeably. It isnot correct to do so. Cost accounting is part of

management accounting. Cost accounting

provides a bank of data for the managementaccountant to use.


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Cost accounting is concerned with the following:

Preparing statement (eg: budget, costing)

Cost data collection

Applying costs to inventory, product and services.


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Management accounting

It is concerned with the following:

Using financial data and communicating it as

information to users.


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The Role of the Trainee

Accountant

Cost of operating a business.

How much revenue has been generated.

Coding invoices.

Calculating cost variances.


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Cost unit

A cost unit is a unit of product or service to

which cost can be related. The cost unit is the

basic control unit for costing purpose.

Eg: room (in hotel), Barrel (in the brewing industry)


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Cost centres

A cost centres is also known as a responsibility

centre.

A responsibility centre is a function or departmentof an organization that is headed by a manager

who has direct responsibility for its

performance. (OR)

It is an organization unit for which a manager is

made responsible.


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Profit centres

A profit centre is any section of an organization to

which both revenues and costs are assigned, so

that the profitability of the section may be

measured.

Remember that there can be several cost centres

within a profit centre.


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Profit centres

Some examples of profit centre:

A sales division selling products to customers.

A service division providing after sales service.

Individual shop in a retail chain.

Local branches in a regional or nationwide

distribution business.

A geographical region. Eg: a country


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Revenue centres

Revenue centres are similar to cost centres and

profit centres but are accountable for revenue

only.

Revenue centre managers should normally have

control over how revenues are raised.


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Investment centres

An investment centre is a profit centre whose

performance is measured by its return on

capital employed.


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Overheads

Overheads (indirect cost) cannot be identified with

any one product because they are incurred for the

benefit of all products rather than for any one

specific product.

Eg: Rent of the factory.


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Fixed Costs & Variable Costs

A fixed cost is a cost which is incurred for a

particular period of time and which, within certain

activity levels, is unaffected by changes in the

level of activity.

Eg: Rent, Annual salary of senior manager


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Product Costing

Job, Batch & Process costing are methods used

to cost end products.


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Cost Codes

Once costs have been classified, a coding system

can be applied to make it easier to manage the

cost data, both in manual systems and in

computerized systems.


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Cost Codes

Feature of a good coding system

The code must be easy to use and

communicate. Each item should have unique code.

The coding system must allow for expansion.

The coding system should be brief.

The likelihood of errorgoing undetected should be

minimized.


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Types of Codes

Sequential (or progressive) codes

Numbers are given to items in ordinary numeral

sequence, so there is no obvious connectionbetween an item and its code. For example

000042 42cm nail

000043 office stapler

000044 hand wash


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Types of Codes

Block (or group classification) codes

These are an improvement on simple sequence

codes, in that digit (often the first one) indicates theclassification of an item. For example

4NNNNN Nails

5NNNNN Screws

6NNNNN Bolts


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Types of Codes

Faceted codes

These are a refinement of block codes, in that

each digit of the code gives information aboutan item. For example


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Types of Codes

The 1st digit: 1 Nails

2 Screws

3 Bolts

The 2nd digit: 1 Steel

2 Brass

3 Copper


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Types of Codes

The 3rd digit: 1 50mm

2 60mm

3 75mm

A 60mm steel screw would have a code of 212


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Types of Codes

Mnemonic codes

Under this type of coding the code means

something, it may be an abbreviation of the objectbeing coded. Most of the time airport use this type

of coding. For example

SIN Singapore

LAX Los Angeles


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Types of Codes

Hierarchical codes

This is a type of faceted code where each digit

represents a classification, and each digit further tothe right represents a smaller subset than those to

the left. For example

3 = Screws

31 = flat headed screws


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Advantages of Coding

A code usually brieferthan a description, thereby

saving clerical time in a manual system & storage

space in a computerized system.

A code is more precise than a description and

therefore reduce ambiguity.

Coding facilitates data processing.


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Presentation of Management

Information

Most information is likely to be presented to

managers in the form of a report.

Main features of a report are as follows: Tile, Who is the report intended for?, Who is the

report from?, Date, Subject & Appendix.


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Presentation of Management

Information


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Role of Information Technology

Computers are widely used for data processing

because they have certain advantages over

humans.

Speed

Accuracy

Volume & complexity

Access to information


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Role of Information Technology

Here is a very simple Eg: of data processing

model.


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The Stages of Data Input

Origination of data (transactions giving rise to

data which need to be recorded and processing).

Transcription of data onto a paper document

suitable for operators to refer to while keying in

data.

Data input.


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The VDU

A VDU (or monitor) display text and graphics and

serves a number of purposes.

It allow the operator to carry out visual check on

what he or she has keyed in.

It gives messages to the operator.

It helps the operator to input data by providing

formson the screen for filling in.


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Graphical User Interfaces (GUI)

GUI have become the principal means by which

humans communicate with machines. Feature

include the following:

Window

Icon

Mouse

Pull down menu


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Automatic Input Devices

Document reading methods reduce the manual

work involved in data input. This save time &

money & also reduces error.

Magnetic ink character recognition (MICR)

Optical mark reading

Scanner

Bar codes

EFTPOS system

M i I k Ch


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Magnetic Ink Character

Recognition (MICR)

MICR involves the recognition by a machine of

special formatted characters printed in magnetic

ink. The characters are read using a specialized

reading device.The main advantage of MICR is

its speed & accuracy, but MICR documents are

expensive to produce. The main commercial

application of MICR is in the banking industry

on cheques & deposits slips.


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Optical Mark Reading (OMR)

OMR involves the marking of a pre-printed form

with a ballpoint pen or typed line or cross in an

appropriate box. The card is then read by an OMR

device which senses the mark in each box using

an electric current & translates it into machine

code. Applications in which OMR is used include

Lotto entry forms, & answer sheets for MCQ.


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Scanner

A scanner is device that can read text or

illustrations printed on paper & translate the

information into a forms the computer can use.


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Bar Codes

Bar codes are group of marks which, by their

spacing & thickness, indicate specific codes or

values.

Large retail stores have Electronic Point of Sale

(EPOS) devices, which include bar code readers.

This enables the provision of immediate sales &stock level information.

El t i F d T f t th


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Electronic Funds Transfer at the

Point of Sale (EFTPOS)

Many retailers have now introduced EFTPOS

system. An EFTPOS terminal is used with a

customers credit card or debit card to pay for

goods or services. The customers credit card

account or bank account will be debited

automatically. EFTPOS system combine point of

sale systems with electronic fund transfer.

St i C t & M t


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Storing Cost & Management

Accounting Data

Data can be stored on disk, tapes or memory

sticks.

O t tti C t & M t


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Outputting Cost & Management

Accounting Data

Data is usually output via printers or VDU

(monitor).

Laser printers print a whole page at a time, rather

than line by line. The quality of output is very

high. Laser printers are relatively expensive to

purchase, but compared with inkjet printers,running costs are relatively low.

O t tti C t & M t


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Outputting Cost & Management

Accounting Data

Inkjet printers are small and reasonably cheap.

They work by sending a jet of ink on to the paper

to produce the required characters.

M t I f ti


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Systems (MIS)

MIS is defined as a collective term for the

hardware and software used to drive a database

system with the outputs, both to screen and print,

being designed to provide easily assimilated

information for management.


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Questions & Answers


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Thank You

Ibrahim SameerSeek knowledge from cradle to grave

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Chapter 1 Management Information & Information Technology