Knowledge that Transforms

Managers are usually responsible for the control of the level of several process variables, such as cost, quality, rate of output, and so on. The levels of these process variables are known as the states of the system, and they may be represented by the values either of a continuous variable or by a discrete variable. It is assumed that these states can be ordered in terms of their desirability. Some processes may move only from a more desirable to a less desirable state while others may shift in either direction. These shifts may occur with or without the intervention of the manager. The control system is a plan formulated by management to indicate when intervention should take place. Three types of control systems are generally possible. The first involves no intervention by the manager until a breakdown of the process occurs. This approach is to be favored when the continued operation of the control system is less costly than the benefits to be derived from intervention. The second type of control system consists of periodic intervention by the manager for purposes of adjusting or otherwise influencing the process. The most compelling reason for this approach lies in its ease of application. The third approach bases the intervention decision on information obtained from the process. This information is typically obtained by sampling. The present paper will concentrate on this third type of control system. Several components are incorporated into any control system. First, the manager must establish the variable or variables to be controlled. He must

Information system design alternatives have long puzzled and frustrated those interested in improving information system design. Design alternatives exist in all phases of the information system including measurement, collection, storage, processing, communication and display.' This study concentrates on a simplification of the general design problem of comparing one specified information system, an information structure, with an alternative. Review of the literature indicates that research methodology for this question is incomplete, particularly with respect to empirical verification of hypotheses, with respect to the development of empirical measures of the usefulness of changes in the information system, and with respect to inclusion of the real decision maker into the analysis. Thus, a main purpose of this study is to develop and implement empirical means of measuring and comparing the effects of changing the design of an information system. An experiment is designed for this purpose. The experiment is a business game that requires the businessmen and student participants to reach decisions concerning production quantities, advertising purchases, and input mix. The independent (controlled) variable in the experiment is a difference in time delay before information is communicated.

Nicholas J. Gonedes, The Significance of Selected Accounting Procedures: A Statistical Test, Journal of Accounting Research, Vol. 7, Empirical Research in Accounting: Selected Studies 1969 (1969), pp. 90-113

Overhead costs, Cost allocation

This study is a sequel to an earlier computer simulation of foreign accounting principles, the results of which were published in the Autumn, 1966 issue of this journal.' In the present study, the actual transaction data of two U.S. manufacturing firms, the same data that had been used previously for a multinational comparison, were used in a computer model to simulate prevailing U.S. and German Accounting practices. The aim was to obtain some notion of the different effects of U.S. and West German accounting practices on financial statements, assuming the underlying transactions are the same. The study is divided into five parts:

Valuation, Depreciation, Asset valuation, Historic costs

upon establishing a means of distinguishing which of two alternative disclosure treatments is the more -useful. The traditional means of attempting to make such distinction is through rational argumentation. Rational argumentation is very useful in exploring and drawing out the logical implications of alternative treatments, but may not be sufficient to enable selection of the better treatment. Recently attempts have been made to employ the Predictive as the means of distinguishing the better of two alternative accounting measurements. This criterion selects as the better of two alternative accounting measurements the one which has the greater to predict a given event considered to be of particular importance.' Surely the application of the predictive ability criterion in accounting research can accomplish much, but continual effort should be made to bring other research methods to bear on the problem of improving accounting disclosure. This paper presents an effort to develop a criterion

Depreciation, Straight-Line depreciation, Investment credit

In a recent article, F. K. Wright proposes a linear programming approach to the measurement of asset services.' He bases his work on the theories and shadow-pricing developed within linear programming. Similar uses of shadow prices are to be found in other papers on accounting research. Usually, in a linear programming context, one need not distinguish between the gain in having one more unit of a resource, as opposed to the loss in having one less unit. The purpose of this note is to show, by means of an example, the need for making such distinctions. I give a simple illustration and then discuss its relation to general linear programming theory and its implications for accounting research.

Performance Measurement, Direct costs, Absorption costing, Ex post optimum model