Name: Cruz, Juvier T.

Course&Year: BSAcT- 4

Subject: Acctg.124

Schedule: 2:30 - 3:30 MWF

SYNTHESIS IN CHAPTER VIII

(THE MANAGEMENT REPORTING SYSTEM)

The management reporting system produces the financial and nonfinancial information needed by the
management of an organization to plan and control its business activities. MRS applications are
discretionary. They are stand alone systems that can be integrated into other AIS applications like the
sales order system, the general ledger system or purchases system. There are several factors that
influence the MRS, namely the decision-making process; management principles, management function,
level, and decision type; problem structure; types of management reports; responsibility accounting;
and behavioral considerations.

In decision making process, it requires steps because it is a series of systematic steps taken by the
decision-maker. First, we need to identify the problem. They say that a decision-maker cannot solve the
problem unless he's able to identify it, apparently. After identifying the problem, you need to find
alternative solutions and evaluate them. If there are no alternatives open, then there is no decision to
make. Next step is the decision criteria. These are critical factors that may either be tangible or
intangible. In here, tangible criteria are much easier to deal with than intangibles, that's why there's
tendency to ignore the latter. After the decision criteria is identifying decision criteria and assigning
weights. This step aims to simplify the production line. It assigns numeric value as a weight in which the
weight represents the relative importance of each factor to the decision. The next step of the decision-
making process is to rate each alternative. This is to evaluate the relative impact of each alternative on
the decision criteria. In this stage, we assign a raw score (RS) to each using a scale of minus (5) to 5.
Afterwards, we calculate the weighted scores (WS) of each decision factor and each alternative by
multipying the weight by the RS value. After which, we implement the best solution or alternative. This
involves a good deal of detailed planning, thus, the most protracted and time-consuming portion of the
decision-making process since the decision-maker must consider all resources necessary to implement
the decision. Lastly, is to conduct a postimplementing review. This is to make sure that the decision and
the decision-making process were sound.

The other factor that influence the MRS is the management principles. These provide insight into
management information needs. These include formalization of tasks, responsibility, authority, span of
control, and management by exception. The first aforementioned suggests that the management should
structure the firm around the tasks it performs rather than around individuals with unique skills. It
asserts that organizational areas should be subdivided into tasks that represent full-time job positions,
and each position must have clearly defined limits of responsibility. Its implication for the MRS is that it
allows specification of the information needed to support the tasks. Next is the responsibity and
authority. The principle of responsibility refers to an individual's obligation to achieve desired results.
Authority and responsibility are like synonymous or related terms, since if you give responsibility you
also give authority. Its implication for the MRS is that it defines the vertical reporting channels of the
firm through which the information flows. The next category under management principles is the span
of control. It refers to the number of subordinates directly under his or her control. A firm with narrow
span of control has fewer subordinates reporting directly to managers. Its implication for the MRS is that
there is more delegation of decision-making authority of the management to their subordinates. Lastly
is the management by exception, which suggests that managers should limit their attention to potential
problem areas rather than being involved with every activity or decision. Its implication for the MRS is
that managements maintain control without being overwhelmed by details.

Management function, level and decision type is another factor that influence the MRS. They have a
significant effect on the management reporting system. Planning can be long-ranged or short-ranged.
The control function ensures that the activities of the firm conform to the plan. It involves evaluating the
operational process against the predetermined standard, and, taking corrective action when needed or
necessary. The top management is responsible for strategic planning; middle management, for the
tactical planning and management control; and the operations management for the operational control.

Next is the problem structure. It reflects how well the decision maker understands the problem. The
data, procedures and objectives are the structure elements. Data are the values used to represent
factors that are relevant to the problem. Procedures are the sequence of steps used to solve the
problem; while objectives are the results that the decision maker desires to attain. When all of these
three elements are known with certainty, the problem is structured.

Another is the management reports. These are formal means for conveying information to managers. It
could be a paper document or electronic image, and, thus may express information in verbal, numeric
or graphic form, or a combination. There are two broad classes of management reports. The first is the
programmed report. It provides information to solve problems that users have anticipated. The ad hoc
report, on the other hand, are special reports that are made or done without planning because of the
immediate need.

Next is the responsibility accounting. It personalizes performance by saying " This is what you were
originally budgeted and this is how your performance for the period compares to your budget." The
concept of responsibility accounting implies that every economic event that affects the organization is
the responsibility of a manager and can be traced to individual manager. In here, the flow of information
is both downward and upward through the use of information channels. It aims to create a set of
financial performance goals or budgets; and report and measure actual performance.

The last factor that influence the MRS are behavioral considerations. These are somewhat synonymous
or related with "goal congruence". Basically, this is the product of the aforementioned factors when
properly applied. A carefully structured MRS plays an important role in promoting and preserving goal
congruence, on the other hand, a badly deigned MRS can cause dysfucntional actions which can cause
trouble with the organization's objectives. Information overload and inappropriate performance
measures are two pitfalls that can cause managers to act dysfunctionally.

The purpose of a reporting system is to influence behavior. It should be scrutinized and designed well in
order to avoid dysfunctional or unpleasant behavior. The factors affecting the MRS must be seen and be
well noted, observed and controlled.