Knowledge that Transforms

Let us now summarize the major results of our analyses. First, after discussing the useful properties of a quadratic cost curve, we showed how the timing of information might actually be evaluated relative to the flexibility of operations. We provided a model in which the timing of information alone (not its content) can affect the profit of the firm not in an all-or-nothing fashion but as a factor that may hopefully make a procrastinator more aware of his guilt. Specifically, our analysis of the effect of the timing of perfect information on the total cost of a firm showed that there is a law of increasing marginal loss with respect to information delay. This analysis also serves as an example of how the framework of information evaluation developed by accountants and information economists can be utilized to yield a specific result. We then demonstrated how the quadratic daily cost-volume relationship might be used to evaluate monthly cost performance. The cost variance analysis showed how the forecasting and information gathering ability of the sales department can he evaluated along with the "genuine" cost performance of production operations. We also analyzed the problem of the optimal balance between the timing and accuracy of information in the case where earlier information is of less accuracy. We were able to derive an optimal information timing explicitly from our imperfect information model. Finally, we pointed out that a study on cost curves may have to be more sensitive to the time period on which the cost curve is constructed. A cost curve is not homogeneous with respect to the length of time of the period. A monthly cost curve may have quite a different shape from a daily cost curve if we allow the production manager to optimize.

In teaching the process and concepts related to the planning and control of operations, many different tools are discussed independently of each other. Due to the complexity of the planning process it is difficult to bring many of these tools together into a practical problem for the students to solve. Fortunately, with a computer the mechanical computations of the tools can be eliminated, and a practical problem can be developed for the students to solve. The project described in this note illustrates how model building, optimization, simulation, and decision rules for variance investigation can be used in the planning and control of the operations of a manufacturing firm. One of the major limitations of the project is the time a student has to wait for the output once he has submitted the budget cards. In the application described in this note most students could achieve only two runs a day. Eventually, this deficiency will be overcome when the PROFPLAN programs is adopted for use with cathode ray tubes. With this adaptation, once the student has developed his initial budget, he will be able to change the input variables and receive the results of the change almost instantly.

The article offers news briefs related to executives and employees in the U.S. accounting industry. Hector Anton of the University of California, Berkeley conducted research on financial accounting standards. Todd S. Smith, formerly employed at Haskins & Sells, was appointed assistant professor at the University of Denver. New staff members joined the accounting department of Georgia State University, including Keith E. Baker, Charles Bostwick, Robert L. Buchanan, Ray Dillon and John D. Ernst.

Reviews two books by John W. Anderson and Robert W. Lentilhon. "The CPA Examination: Practice, Auditing, and Theory," Volume I; "The CPA Examination: Suggested Solutions," Volume II.

The article presents the author's examination of incorporating instruction in computers, programming and electronic data processing concepts into the accounting curriculum. the author observed that the introductory course in computers is a significant pre-requisite to effective integration of the computer in the functional courses. He also observed that data-based systems and user-oriented software enhance the flexibility and diversity of learning experience available to students. He also added that direct incorporation of computers into the accounting curriculum can augment the student's ability to make efficient use of the computer and help him attain a greater depth of understanding of the subject matter.

Reviews the book "Getting Acquainted With Accounting," by John L. Carey.

The article discusses a study on the impact of certified public accountant (CPA) review course on the expectations of candidates about CPA examination. Results indicated that the ingredients for success on the CPA examination are positive attitude and motivation. Findings also indicated that high expectations of performance may aid actual performance through promotion of essential attitude and motivation. Findings also showed a definite relationship between the CPA review course and reported expectations of the participants.

Reviews the book "Unaccountable Accounting," by Abraham J. Briloff.

The article focuses on a project funded by the American Accounting Association in 1971, which was intended to initiate a library of time-sharing programs designed for use in accounting curricula. The aim of the project was to centralize and develop programs so that they would be available in each of the special interest areas of accounting, namely, financial, cost, auditing, tax and managerial. Among the available programs were the computation of annual depreciation by four methods and the computation of twenty basic financial ratios.

This article presents comments on the introduction of probabilities and present value calculations into the analysis of gift tax. While the verbal description is formulated in terms of present value, it is actually future value which is calculated. While either of these may be used to choose amongst alternatives, two future values cannot be compared if they are not carried to the same date. The estate tax liability is calculated on the rather strange assumption that the taxpayer will die with certainty when exactly reaching his expected life.