AACS4794 MANAGEMENT INFORMATION SYSTEM Tutorial 3 answer August 18, 2010

Question 1
a) Tangible benefit ate benefit that can be quantified and monetary value this benefits. This
Benefit usually come from two major sources, decreased costs or increased revenues. Cost
savings or decreases in expenses come from increased inefficiency in company operations.
Intangible benefit are the benefits that are not easily quantified, it include more efficient
customer services or enhanced decision making. It cannot be immediately quantified, but
may lead to quantifiable in long run.
b) Example of tangible benefits are, reducing staff by automating manual functions or increase
efficiency, and reducing error rates through automated editing or validating.
Example of intangible benefits is increased levels of services (in way that cannot be
measured).

Question 2
Payback analysis is a method to measure of time required to pay back the initial investment on a
project. It is a popular method because of its simplicity can power as an initial screening method.

There are limitation for this method, such as it does not take into account the time value of money,
For instance, a dollar saved today is worth more to us than a dollar saved ten years from now. The
pay back analysis does not take into account the interest earn for each annual saving.

Secondly, it does not measure the overall profitability of the whole project; it does not consider any
benefits of the system that are accrued after the payback period. For instance, an alternate solution
might produce the greatest benefits at the lowest cost a year after the payback period has ended, a
fact that is ignored by payback analysis.

Question 3
A performance measure used to evaluate the efficiency of an investment or to compare the
efficiency of a number of different investments. To calculate ROI, the benefit (return) of an
investment is divided by the cost of the investment; the result is expressed as a percentage or a
ratio. 
The return on investment formula:

Return on investment is a very popular metric because of its versatility and simplicity. That is, if
an investment does not have a positive ROI, or if there are other opportunities with a higher ROI,
then the investment should be not be undertaken.

Question 4
Present value analysis is a method of evaluation capital investment using discounting arithmetic to
determine whether or not they will provide a satisfactory return. Its measure all relevant cash flow
associated with a project over its whole life and adjust these occurring in future year to “present
value” by discounting at a rate called discount rate.
AACS4794 MANAGEMENT INFORMATION SYSTEM Tutorial 3 answer August 18, 2010

Question 5
The time value of money (TVM) refer to a concept of which a dollar you have today is worth more
than a dollar in future, this is because money is subject to inflation and depreciation, the value of
money will decrease over the time pass. Additionally, money receive in future has to be discount by
some appropriate percentage rate, such as cost of capital rate and prevailing interest rate.

Question 6
The limitation of the financial models is the cost and benefits factoring does not account for the risks
in assessing the final outcome. It tends to overlook or ignore the social and organizational
dimensions of information systems that may affect the true costs and benefits of the investment.

For example, many companies’ information systems investment decision do not adequately consider
costs from organizational disruptions created by a new system, such as the cost to train end users,
the impact that users’ learning curves for a new system have on productivity or the time managers
need to spend overseeing new system related changes. Benefits, such as more timely decision from a
new system or enhanced employee learning and expertise, may also be overlooked in a financial
analysis.

Question 7
The portfolio can be described as having a certain profile of risk and benefit to the firm. It can be
used to select alternatives after determined the overall direction of systems development. Usually, it
focusing on systems of high-benefit and low-risk; these promise early returns and low risks. However
high benefit and high risk system should be examined; low benefit and high risk benefit system
should be avoided; low benefit and low risk system should be reexamined for the possibility.

Question 8
Scoring model is a quick method for deciding among alternative systems based on a system of ratings
for selected objectives. It gives alternative systems a single score based on the extent to which they
meet selected objectives, and helps to bring about agreement among participants concerning the
rank of the criteria. Scoring model consists of criteria, weights and scale. The outcome is not the
score, but the agreement on the criteria used to judge the system.

Question 9
Criterion Weight student 1 Student 1 student 2 Student 2 Student 3 Student 3
marks score mark score mark score
Exam 1 15 100% 15 80% 12 90% 13.5
Exam 2 20 100% 20 80% 16 75% 15
Exam 3 25 100% 25 80% 20 80% 20
Home 20 100% 20 90% 18 90% 18
work
Project 20 100% 20 95% 19 70% 14
Total 100 85 80.5
AACS4794 MANAGEMENT INFORMATION SYSTEM Tutorial 3 answer August 18, 2010

Case Study
Question 10
Portfolio analysis help Erust & Young develop an overall understanding of involved project (Lotus
Notes) risks and benefits profile (estimation). It allows Erust & Young top management to judge
further whether to processed or not with this Lotus Notes tool implementation.

According to the case, there are quite a number of advantages/ benefits mentioned: Erust & Young’s
worldwide revenue grew by 17%. The company able to communicate with each other across
geographical national border, and enable the sharing of knowledge and information among the
members firms within local and multinational team, within services lines and across national
boundaries. For example the entire member can manage the project and share work product and
idea together.

However, according to the case, the risk involve are quite low, because the excellent support of Lotus
consulting which had taken the effort to satisfy its client’s requirements and help them at every step
of the way. For example, Lotus consulting helped the company in designing the internal notes
network and also provided system support, which included the assignment of a special Lotus Notes
account manager dedicated only to Erust & Young.

Question 11
a) Tangible benefit is benefit that can be quantified and assigned a monetary value. For example
increase in sales revenue and operating cost reduction.
Intangible benefit is benefit that cannot easily quantify and cannot assigned a monetary value on
it. For example improve customer satisfaction and increase company image.
b) The tangible benefit of the new Oracle E-Business Suite Software can reduce the inventory cost.
The company build car that customer want, fulfill what customer needs, hence there will no
excessive stock.
Toyota gain benefit on reduce operating cost with the new Oracle E-Business Suite Software. It
reduce the error rate through automate editing or validating system, for example the national
distributor can use the system to monitor the order and swap car with various retailers.
Besides that, the new Oracle E-Business Suite Software can reduce the processing cost by
achieves quicker processing in car order transaction between dealer, distributor and retailer.
Finally, the new system also reduce the paper cost since the customer place their order online
instead of using paper form.
Intangible benefits of the new system such as increase customer services, the system allow the
customer to select their desire car with various options available, hence this increase the degree
of customization with the new Oracle E-Business Suite Software. The system will also increase
the customers satisfaction, because customer don’t need to wait too long, the system help them
to save time.
Besides that, the new system improved information transparency, such as how much customer
order? What customer order? And which dealers handle for which order. Finally it improved
company image and brand recognition, with a better one-stop services and functions offered.
AACS4794 MANAGEMENT INFORMATION SYSTEM Tutorial 3 answer August 18, 2010

Question 12
Tangible benefits can be quantified and assigned a monetary value. It usually comes from decreased
cost or increase revenue.

With the new technology, Dorfman can now handle twice the number of orders during peak seasons,
the technology give the benefit in improve efficiency and increase the productivity, and hence the
overall profit had increase.

Besides that, the new technology also gives benefit on reducing labor cost. The labor costs are down
by 30%.

By eliminating the need for temporary worker and work overtime, the company has saved $250, 000
per year.

Intangible benefits refer to benefits that not easily quantified. This includes the increase the
efficiency of customer’s services, and increase decision making. Such gain may not be noticed
immediately but only late in long run.

Example from the case, the pickers use mobile device that receive data telling them accurate
information and how to use the most effective route.

The new organizes method improves Dorfman efficiency, thus allowing them to make shipments on
time, and hence improve company reputation for being trustworthy.