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Introduction

To manage the an enterprise, systematic and comparative cost


information as well as analytical cost and profit data is needed this
information helps management set the company’s profit goals , establish
departmental targets which direct middle and operating management
toward the achievement of the final goal, evaluat4e the effectives of plans,
pinpoint successes or failure interims of specific responsibilities, and analyze
and decide on adjustment and improvements to keep the entire organization
moving forward, in balance toward established objectives. An integrated and
coordinated and information system should provide only that information
which is needed by each responsible manager. To accomplish these
objectives, the system must be designed to provide information promptly.
Further more, the informants must be communicated effectively. Cost
controls needs and profit opportunities may be delayed or missed because of
poor communication.

The accumulation of accounting data requires many forms, methods


and systems due to the varying types and sized of business. A successful
information system should be tailored to give the blend of sophistication and
simplicity that is most efficient and economical for specific organization,
designing a cost accounting information system requires a thorough
understanding of organization structure of the company an type of cost
information required by all levels of management. This interface between the
system management, and employees has significant behavioral implications.
The system may enhance or thwart the achievement of d4esired results,
developing administering, and improving the system and in educating
employees to observe cost control procedures.

The cost accounting information system must be closely associated with


division of authority, so that individual managers can be held accountable for
the cost incurred in their departments, The system should be designed to
promote the concept of management by exception; i.e it should project
information that enables management to take prompt remedial action. The
system should also reflect the manufacturing and administrative procedures
of the practical company for which it is designed. Although the accounting
records will not provide all the necessary information for effect5ive
management, the accountant who designs the system must know how
employees are paid, how inventories are controlled, how equipment is
costed, machine capacities, and other operating information.

The information system should provide the proiper focus for management’s
attention. Certain significant aspects of performance may be difficult to
measure, while more easily measure by less significant factories my cause
the firms to pursue or over emphasize activities that are not in its long run
be interest. Managers should be nformed as to the appropriate, intended
uses as well as the limination of information. At the same time, the
information system’s utility should be extended if possible.

Requirments for record keeping and reporting may be imposed on an


organization by external forces, such as the Internal Revenue Code, the
Federal Insureance Contributions Act, the Securies and Exchange
Commision, Socst Accounting Standards, other governmental regularotry
ageincies and taxing authorities , as welll as creditors and labvour unitions.
These legal and contractual requirements must be met by a systm that is
designed in cost conscious manner. Any sophistication in a system, beyond
the basic requirements, must be justified solely on basi of its value to
management.
Explanation:
Cost Accounting Information System (CAIS) is an accounting
information system which determines the costs of products manufactured or
services provided and record these costs in the accounting records.

Functions of Cost Accounting Information System (CAIS)

Generally the purposes or functions of cost accounting information


system fall into four categories. These include providing information for:

1. External financial statements,


2. Planning and controlling activities or processes,
3. Short term strategic decisions and
4. Long term strategic decisions.

These four functions relate to different audiences, emphasize different


types of information, require different reporting intervals and involve
different types of decisions.

CAIS Technology

• Input: The input devices commonly associated with CAIS include:


standard personal computers or workstations running applications;
scanning devices for standardized data entry; electronic
communication devices for electronic data interchange (EDI) and e-
commerce. In addition, many financial systems come “Web-enabled”
to allow devices to connect to the World Wide Web.
• Process: Basic processing is achieved through computer systems
ranging from individual personal computers to large-scale enterprise
servers. However, conceptually, the underlying processing model is
still the “double-entry” accounting system initially introduced in the
fifteenth century.
• Output: Output devices used include computer displays, impact and
non-impact printers, and electronic communication devices for EDI and
e-commerce. The output content may encompass almost any type of
financial reports from budgets and tax reports to multinational
financial statements.

Development of CAIS

The development of a CAIS includes five basic phases: planning, analysis,


design, implementation, and support. The time period associated with each
of these phases can be as short as a few weeks or as long as several years.

1. Planning—project management objectives and techniques: The


first phase of systems development is the planning of the project. This
entails determination of the scope and objectives of the project, the
definition of project responsibilities, control requirements, project
phases, project budgets, and project deliverables.
2. Analysis: The analysis phase is used to both determine and document
the cost accounting and business processes used by the organization.
Such processes are redesigned to take advantage of best practices or
of the operating characteristics of modern system solutions.
3. Design: The design phase takes the conceptual results of the analysis
phase and develops detailed, specific designs that can be implemented
in subsequent phases. It involves the detailed design of all inputs,
processing, storage, and outputs of the proposed accounting system.
Inputs may be defined using screen layout tools and application
generators. Processing can be shown through the use of flowcharts or
business process maps that define the system logic, operations, and
work flow. Logical data storage designs are identified by modeling the
relationships among the organization’s resources, events, and agents
through diagrams. Also, entity relationship diagram (ERD) modeling is
used to document large-scale database relationships. Output designs
are documented through the use of a variety of reporting tools such as
report writers, data extraction tools, query tools, and on-line analytical
processing tools. In addition, all aspects of the design phase can be
performed with software tool sets provided by specific software
manufacturers.
4. Implementation: The implementation phase consists of two primary
parts: construction and delivery. Construction includes the selection of
hardware, software and vendors for the implementation; building and
testing the network communication systems; building and testing the
databases; writing and testing the new program modifications; and
installing and testing the total system from a technical standpoint.
Delivery is the process of conducting final system and user acceptance
testing; preparing the conversion plan; installing the production
database; training the users; and converting all operations to the new
system.
5. Support: The support phase has two objectives. The first is to update
and maintain the CAIS. This includes fixing problems and updating the
system for business and environmental changes. For example,
changes in generally accepted accounting principles (GAAP) or tax laws
might necessitate changes to conversion or reference tables used for
financial reporting. The second objective of support is to continue
development by continuously improving the business through
adjustments to the CAIS caused by business and environmental
changes. These changes might result in future problems, new
opportunities, or management or governmental directives requiring
additional system modifications.

Benefits of cais

• A cost accounting information system offers benefits for many


companies. Cost accounting is a type of accounting method concerned
with the cost of goods manufactured and/or sold. Many factors are
taken into consideration when cost accountants analyze business
costs. The information determined by these accountants is used for
inventory valuation, financial statements and decision making.

Inventory Valuation

• Cost accounting offers the benefit of having an accurate inventory


valuation of all inventories on hand. This includes all raw products used
to make goods, all work-in-process inventories and all finished goods
ready for sale. Cost accountants take all costs into consideration and
are able to determine the value of all of these inventories on hand.
This information is useful for financial statements and for management
of the company. Managers use this information to determine selling
goals and production needs.

Maximum Efficiency

• Cost accounting is beneficial to determine the maximum efficiency


production amounts. Cost accountants take all costs into consideration
when calculating this amount. Manufacturing costs consist of direct
labor, materials and manufacturing overhead. These costs are all
calculated and added up to find a per-unit cost price for manufactured
items. When the cost price is calculated, these accountants begin
determining a hypothesis of production rates. Many times cost
accountants determine that if production is increased slightly,
overhead costs remain the same. If this is the case, increasing
production actually results in a lower per-unit cost for production, and
the end result is a higher profit.

Decision Making

• The information determined by cost accountants is used for decision


making for future company needs. Short-term goals and decisions are
made as well as long-term strategic decisions. The analysis of cost
information is used to compare projected costs to actual costs. This is
useful for businesses when budgets are created. Often times,
unforeseen costs occur with production, and they are determined in
this way. Unforeseen costs are added into the future budgets at rates
calculated by cost accountants. Cost accounting also helps companies
establish approximate future cash flows. Short-term production goals
and marketing decisions are set based on this information. Long-term
production plans are also calculated.

Cost Accounting Information System (CAIS) is an accounting information


system which determines the costs of products manufactured or services
provided and record these costs in the accounting records.

Diagrammatic Explanation:

The Flow Of Cost In Manufacturing Enterprises.


There are two major solution providers detailed below in the world which are providing
cost Accounting Information System (CAIS).

i. Siemens (Systems Application & Product) SAP


ii. Oracle Corporation (Enterprise Recourse Planning) ERP

ERP calls for different operations and applications in different industries. Each industry has
their own drawbacks and plus points in dealing with the enterprise applications. A
comparative study will help in analyzing them precisely. This can be understood well in this
ERP Industry paper.

Here we will take in the account the solution provided by Oracle Corporation i.e
Enterprise Recourse Planning ERP.

Manufacturing:
ERP has helped to increase the efficiency and quality of the manufacturing process.
The manufacturing process experienced slumps quiet often because of improper
communication, miscommunication, wrong communication and even lack of communication.
ERP provided solutions to those troubles by coordinating the actions of supply chains, ware
house and logistics.
It also helped greatly in functions like tracking down the status of the product. Formerly
customers were made to run from pillar to post to enquire the status of product or for
enquiring a technical problem. The customer service representative would not be in a
position to directly reply to these queries. On the contrary he would ask the person from the
concerned department. The person would check the details and get back to him be it the
status of a product or technical issue. This seemed to be time-consuming and meaningless.
The longer the chains of communication greater are the chances of mistakes. CSC erp
finance is a software meant for accounting purposes.

Software:

The manufacturing sector has been rated as the largest beneficiary. This sector can be rated
as the one who uses ERP easily because it is a product from their species. This does not
undermine ERP'S use in Software sector because it becomes easy to manage projects with
acute deadlines. ERP industry paper will also reveal that it is easy to train and make people
work in this sector than anywhere else.