Pearson Accounting Informtation System Prnlem Solution
1-1
© 2009 Pearson Education, Inc. Publishing as Prentice Hall
CHAPTER 1
ACCOUNTING INFORMATION SYSTEMS: AN OVERVIEW
SUGGESTED ANSWERS TO DISCUSSION QUESTIONS
1.1 The value chain classifies all business activities into two categories: primary activities and support
activities. The five primary activities are: inbound logistics, operations, outbound logistics, sales &
marketing, and service. The four support activities are: firm infrastructure, human resources
management, technology, and purchasing.
The inbound logistics function at S&S includes all processes involved in receiving merchandise
and storing it. S&S does not manufacture any goods, thus its operations activities consist of the
processes involved in displaying various merchandise for sale. The outbound logistics activity at
S&S includes delivering the products to the customer. The sales & marketing activity includes
advertising and the actual processing of sales transactions. The service activity includes all post-
sales services offered to customers, such as repairs and periodic maintenance.
The firm infrastructure at S&S includes the accounting function. Its human resource management
activity includes all the processes involved in recruiting, hiring, training, evaluating, and
dismissing employees. The technology support activity includes all investments in computer
technology and various input/output devices, such as point-of-sale scanners. The purchasing
support activity includes all processes involved in identifying and selecting vendors from whom
S&S will acquire goods and negotiating the best prices, terms, and support from those suppliers.
1.2 Usually, most organizations will only produce information if its value exceeds its cost. There are
two basic situations, however, in which information may be produced even if its costs exceed its
value. First, it is often difficult to accurately estimate the value of information and, sometimes, the
cost of producing it. Therefore, organizations may produce information that they expect will
produce benefits in excess of its costs, only to be disappointed after the fact. The second reason is
that production of the information may be mandated by either a government agency or a private
organization. Examples include the tax reports required by the IRS and disclosure requirements for
financial reporting established by the Financial Accounting Standards Board.
1.3 Well-designed controls should not be viewed as "red tape" because they can actually improve both
efficiency and effectiveness. Consider a control procedure mandating weekly backup of critical
files. Regular performance of this control prevents the need to spend a huge amount of time and
money recreating files lost when the system crashes, if it is even possible to recreate the files at all.
Similarly, control procedures that require workers to design structured spreadsheets can help
ensure that the spreadsheet decision aids are auditable and are documented well enough so that
other workers can use them.
1.4 Initially, if a product has a marginal cost of production and distribution that is close to zero, there is
the potential to significantly increase profits. An important issue, however, is whether the asset in
question is unique. If other companies can provide the same product, or a close substitute, then
intense price competition may ensue. In a free market, the result is likely to reflect a basic
economic principle that marginal revenue = marginal cost. There are also accounting policy
Pearson Accounting Informtation System Prnlem Solution
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