FIN 401 Chapter Notes - Chapter 2: Management Accounting, Forklift, Accounts Payable
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Competency
Design the steps to justify an information systeminitiative.
Scenario Information
BeGood Baking Supply is a small bakery supply company formed asa closely held corporation. The company supplies raw bakingmaterials, paper goods, and equipment to restaurants and bakeriesin three states in the upper mid-west. Most of its business,however, is located in a large metropolitan area. BeGood wants toincrease its presence in the region and serve five states. In fact,the owners of BeGood would like 75% of their business to come fromthroughout the region rather than the current metropolitan area. Inorder to do this, the owners understand they must diversifyofferings and lines of business.
Currently, BeGood has a phone center where customer orders aretaken; these orders are then sent to shipping where the order isfilled in its large warehouse and shipped within four days. BeGoodoutsources its shipping to a local trucking company. Once the orderships, all paperwork goes to the accounting department where it isentered into the accounting system. BeGood still uses the sameaccounting system it has used since the inception of the company.All aging of receivables and other analysis is done using Excelspreadsheets. Purchasing and tracking of inventory are done solelyby the warehouse manager. Invoices for inventory purchasing aresent to the accounting department when goods are received.
The owners at BeGood are wondering how they can utilize anonline presence and further automate its systems in order tofacilitate its growth and diversify its business. The owners mayalso like to expand into the retail business.
You have been hired as a full-time staff accountant at BeGoodBaking Supply and have been given the task of evaluating andrecommending a viable accounting information system for theaccounting and financial data of BeGood in order to facilitateexpansion and diversification. As you begin your research, yourealize that many departments are involved in the informationsystem, and communication is key.
BeGood Baking Supply is considering adding an automated orderingmodule to their current AIS system. As the accountant pushing forthis change, you are in charge of the analysis and presentation ofthe information and recommendation for the new system. Inperforming the analysis for your presentation, you have identifiedtwo possible modules that will fill the needs of the company. Bothmodules return a positive NPV.
Module Vendor | A | B |
Useful Life | 5 years | 5 years |
Acquisition Cost | 300,000 | 250,000 |
Yearly Operating Costs | 95,000 | 100,000 |
Yeaerly Benefits | 205,000 | 150,000 |
Cost of Capital | 10% | 10% |
Payback | 1.5 years | 2.5 years |
Instructions
Your task is to present to management a proposal outlining youranalysis and recommendation of which system to purchase. Write aproposal to management outlining the decision-making process andthe system you recommend. Include in your proposal:
- The steps necessary in evaluating and recommending an AISmodule. Note: these are the steps you would take to educateyourself on the need for a new model, the options available, andthe choice of the best module.
- List of needs BeGood has with respect to this automatedordering module. Include present needs as well growth needs
- List of criteria you used in choosing a module. Includefinancial criteria, expansion and growth criteria, and currentneeds. Be sure to address internal control and audit needs.