Essentials Of Cost Accounting

Business

Quiz 15 :
Information Systems for Costing

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Quiz 15 :
Information Systems for Costing

Organisations design and use templates as per their requirements internally. There are no standard templates to be used by the organizations as it depends on the nature of the activities involved by them. Managers use their own computer templates as it is easier for them to analyse the data and make timely decisions. It is more convenient for them to demonstrate to the management about their views and opinions. If each and every manager follows their own computer templates to gather data and analyze the data, then the organization may pose to different risks. Risks encountered by organization when managers design their own templates are enlisted below: 1. Quality control : There is lesser control over the quality of data. The spreadsheet or program developer spends considerable time in developing the spreadsheet. Thus, if he himself uses the information he will not cross check. There is not enough control over quality. 2. Narrow Scope : The manager's modify templates according to their needs. Thus, this leads to rigidity as the templates are highly customized. If a manager develops a template that is to be utilized by the entire department, then there is inflexibility and such template will not prove useful. Information system develops tailor-made templates which can encompass all the operations of the organization. 3. Program Stability : Mostly the systems are static and assume that the information to be processed as stable. Thus, there is less adaptability as the manager cannot add new variables. 4. Orgnizational Access : There can be duplication of work is more prevalent when each manger develops system for himself. Also, the organization becomes dependent on a specific individual who creates the system. Thus, the underlying risk is that the information flow of the organization will be disrupted if that person leaves the organization.

Computerized System of Cost Accounting : These are the templates, frameworks or a system which is used to forecast the costs and profits. These templates and systems help in valuation of inventory, analysis of profitability and controlling cost. The management must keep the essential features while formulating the computer template, or cost accounting system. These essentials are enlisted below: 1. The type of information and reports that management feels is useful to the organization. Thus it determines what the content of the information and reports is. 2. The managers must also anticipate when the information is required. Thus, the timing of the report is essential. 3. The third essential is to anticipate the right amount of information which is required. Managing information is costly and time consuming. If the information is vast, then the cost of managing will increase. However, when the information is less, prudent decisions cannot be made. Thus, it is necessary to ascertain the right amount of detail and content that is required. 4. The another essential key is to present the information in useful manner. Health care organizations have large amount of data in their information system. Thus, the key information must be presented in such a manner that the managers can make prudent decisions without any delay. 5. The inputs from all the managers must be considered while building cvost accounting system. This system ensures proper movement of information throughout the organization. Also, all the managers and departments must be surveyed for their inputs. This ensures a holistic approach for information system.

Computerized System of Cost Accounting : These are the templates, frameworks or a system which is used to forecast the costs and profits. These templates and systems help in valuation of inventory, analysis of profitability and controlling cost. The computerized system sometimes can prove inefficient under certain circumstances. The various points that management must consider before acquiring this system are enlisted below: 1. The manager must understand that implementing computerized accounting system requires considerable amount of cost and time. 3. Employees need to be trained with unfamiliar technology. 4. Program instability over time. 5. It may create duplication of efforts by different department heads.