chapter-4 management accounting information...
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CHAPTER-4
MANAGEMENT ACCOUNTING INFORMATION SYSTEM IN
ORGANIZATIONS
4.1 Management Accounting Information System (MAIS)
4.1.1 What is management accounting information system?
4.1.2 Operational model and characteristics of MAIS
4.1.3 Factors influence data quality in MAIS
4.1.4 Traditional versus sophisticated MAIS
4.1.5 Usefulness of MAIS
4.2 Previous Studies
4.2.1 Studies related to cost accounting system and pricing
policy
4.2.2 Studies related to usage of management accounting
techniques
4.2.3 Studies related to information characteristics of MAIS
4.2.4 Studies related to the use of MAIS
4.3 Chapter Summary
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The previous chapter has provided detailed discussion on management accounting and
decision making to support the role of MAIS on managerial decision making in
Ethiopian medium and large scale printing companies. Although it is a research area
in which not much research has been conducted and calls for further research as only
exists. It is the purpose of this chapter to review this literature.
This chapter reviews the literature on various issues related to management
accounting information system (MAIS) in organizations. The chapter begins by
reviewing the theoretical concept of MAIS. It includes the concept of MAIS,
operational model and characteristics of MAIS, factors influencing data quality in
MAIS, traditional versus sophisticated MAIS, and usefulness of MAIS. Then reviews
of various related studies conducted in this important field of research are presented.
It provides the researcher proper direction to carry out their research work and enables
them to arrive at meaningful conclusions. Therefore, the past studies were reviewed
and presented in this chapter.
Very few research studies have been carried out in the field of MAIS in general. The
available literature relevant to the objectives of the present study was reviewed and
presented under the following headings: cost accounting system and pricing policy,
usage of management accounting techniques, information characteristics of MAIS,
and the use of MAIS. Finally, the chapter ends with a summary.
4.1 Management Accounting Information System
4.1.1 What is management accounting information system?
Chenhall (2003) defined Management accounting information systems (MAIS) as a
formal system designed for providing information to facilitate decision making and
evaluation of managerial activity. Atkinson et al. (2001), defined as “information
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system which is collecting operational data and financial, processing, keeping, and
reporting to user”. A definition by Bruggeman and Slagmulder (1995) describes
MAIS as: MAIS collect, classify, summarize, and report information to managers to
assist them in their control of production activities. It is an integral part of an
organization which is related to the structure and organization process, for products
control of organization including manager control.
The definitions supplied by all sources seem to be very much in synch. MAIS in this
thesis is defined as accounting system that records, processes and reports financial
information for internal use in accordance with the preferences of management. The
scope of this system is usually broader than that required by GAAP or IFRS.
4.1.2 Operational model and characteristics of MAIS
The MAIS provides information needed to satisfy specific management objectives.
The operational model of a MAIS is illustrated in Figure 4.1.
Figure 4.1: The Operational Model of a MAIS
Collecting Special reports
Measuring Product costs
Storing Customer costs
Analyzing Budgets
Reporting Performance reports
Economic events Managing Personal communication
Source: Adapted from Hansen and Mowen (2007)
Outputs Processes Inputs
Users
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At the heart of a MAIS are processes; which transform the inputs into outputs and are
such things as collecting, measuring, storing, analyzing, reporting, and managing
information. Information on economic events is processed into outputs that satisfy the
system’s objectives. Out-puts include special reports, product costs, customer costs,
budgets, performance reports, and even personal communication (Hansen and
Mowen, 2007).
The MAIS is not bound by any formal criteria that define the nature of the processes,
inputs, or outputs. The criteria are flexible and based on management objectives.
Hansen and Mowen (2007) have identified three main objectives of a MAIS, these
are:
1. To provide information for costing out services, products, and other objectives
of interest to management.
2. To provide information for planning, controlling, evaluation, and continuous
improvement.
3. To provide information for decision making
These three objectives show that managers and other users need access to
management accounting information and need to know how to use it. Thus
management accounting information is needed and used in all phases of management,
including planning, controlling, and decision making. Management accounting
information has been characterized by breadth of scope, timeliness, levels of
aggregation and integrative nature (Chenhall and Morris, 1986). Table 4.1 gives an
overview of the information characteristics of MAIS considered important by these
managers nowadays.
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Table 4.1: Information Characteristic of MAIS
Information dimension Characteristic
Scope
External information
Non-financial information
Future-oriented
Timeliness Frequency of reporting
Speed of reporting
Aggregation
Aggregated by time period
Aggregated by functional area
Analytical or decision models
Integration
Precise targets for activities and their interrelationship within
sub-units
Reporting on intra-sub-unit interactions
Source: Chenhall and Morris (1986)
The scope dimension has three sub-dimensions as focus, quantification, and time
horizon (Chenhall and Morris, 1986). It is viewed as a continuum with narrow scope
at one end and broad scope at the other. Narrow scope information has been linked
with traditional accounting systems in that these systems are limited to providing
information that is internally focused, financial, and history-based information.
Broad scope information provides managers with a wider range of solutions to
consider. This enables them to better understand the input/out- put relation (Chenhall
and Morris, 1986; Gordon and Miller, 1976). It also increases the probability that one
of the alternatives considered will be consistent with the objectives of other
interdependent departments. The broad scope would provide estimates of the
likelihood of future events to occur, possibly in probable terms.
The second characteristic of MAIS is timeliness. The timeliness dimension is
conceptualised into two sub-dimensions: frequency of reporting and speed of
reporting. Frequency pertains to how often information is provided to managers,
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while speed refers to the time lag between when a manager requests for information
and when the required information is provided to the manager (Bouwens and
Abernethy, 2000). Chenhall and Morris (1986) defined timeliness as a manager’s
ability to respond quickly to events regarding to provision of information on request
and the frequency of reporting systematically collected information. Timely
information also has the potential to reduce uncertainty. It enables managers to
continually adjust their activities in response to the changes demanded by
customization as well as the changes occurring in other interdependent departments.
Timely information enhances the facility of MAIS to report upon the most recent
events and to provide rapid feedback on management decisions (Chenhall and Morris,
1986). Furthermore, according to him a manager's ability to respond quickly to events
is likely to be influenced by the timeliness of the MAIS.
The third characteristic of MAIS is aggregation. The aggregation dimension provides
information in various forms of aggregation ranging from provision of basic raw,
unprocessed data to a variety of aggregations by functional area (i.e. summary reports
on activities of other business units, or other functions of the organization), by time
period (e.g. month, year) or through decision models, for example supporting
marginal analysis, inventory models, discounted cash flow analysis, what-if-analysis,
cost-volume-profit analysis (Chenhall and Morris, 1986).
Aggregated information enables managers to process larger quantities of information.
It condenses information into a format that can be processed quickly and, thus,
increases the overall amount of information that can be processed within a given time.
The potential for sub-optimal decision making owing to information overload is
thereby reduced. Aggregation of information enables managers to consider more
alternatives and develop a better understanding of input/output relations both at the
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department and within departments. This increases the probability that solutions will
be found that are optimal for the overall firm.
Finally, Integration of information refers to how well the information flows within the
segments or sub-unit in organizations. Thus, allowing information sharing throughout
the sub-unit. The integration of information within sub-units will help the managers in
different departments seeking useful information from other department more easily.
Not only the flow of information is important, the coordination of the various
segments within a sub-unit is also an important aspect of organizational control
(Gordon and Miller, 1976). Integrated information reduces uncertainty relating to
cause and effect relations within departments as it encourages learning and the
generation of ideas. It enables departmental managers to `learn' how to adjust
products and production methods to be compatible with other departments. It also
enables managers to better understand the different objectives that exist within
separate decision units and to make trade-offs among alternative ways to operate
within the given set of objectives.
Among the characteristics of MAIS, the breadth of scope of the information has been
identified as potentially important in assisting managerial decision making (Hayes,
1977; Chenhall and Morris, 1986). Narrowly focused MAIS is derived from
conventional financial accounts, tends to be concerned with events within the
organization, and produces data that are financial and historic. Alternatively, broad
scope MAIS includes external, non-financial and future oriented information
(Chenhall and Morris, 1986). Support for the importance of broad scope MAIS draws
on the belief that managers are involved in a wide variety of tasks and processes
which entail dealing with events which are complex and uncertain. The quantification
of such events typically includes nonfinancial information, often related to the future.
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4.1.3 Factors influencing data quality in MAIS
Today’s organizations are operating and competing in an information age.
Information has become a key resource of most organizations, economies, and
societies. Indeed, an organization’s basis for competition has changed from tangible
products to intangible information. More and more organizations believe that quality
information is critical to their success (Wang et al., 1998). However, not many of
them have turned this belief into effective action. Poor quality information can have
significant social and business impacts. There is strong evidence that data quality
problems are becoming increasingly prevalent in practice.
Most organizations have experienced the adverse effects of decisions based on
information of inferior quality (Huang, Lee and Wang, 1999). It is likely that some
data stakeholders are not satisfied with the quality of the information delivered in
their organizations. In brief, information quality issues have become important for
organizations that want to perform well, obtain competitive advantage, or even just
survive in the 21st century.
Traditionally, data quality has often been described from the perspective of accuracy.
Nowadays, research and practice indicates that data quality should be defined beyond
accuracy and is identified as encompassing multiple dimensions (Huang, Lee and
Wang, 1999). However, there is no single standard data quality definition that has
been accepted in the field. Information is an objective commodity carried by symbols
and relates to who produced it, why and how it was produced and its relationship to
what it signifies (Shanks and Darke, 1998). Although data and information are
different concepts, data quality is often treated as the same as information quality, in
some literature and real-world practice. Therefore, in this research, data quality and
information quality are synonymous.
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The general definition of data quality is ‘data that is fit for use by data consumers’
(Huang, Lee and Wang, 1999). Many data quality dimensions have been identified.
Commonly identified data quality dimensions are:
Accuracy, which occurs when the recorded value is in conformity with the
actual value;
Timeliness, which occurs when the recorded value is not out of date;
Completeness, which occurs when all values for a certain variable are
recorded, and
Consistency, which occurs when the representation of the data values, is the
same in all cases (Ballou et al., 1993).
The dimensions that have been identified by Ballou et al. (1993) will be adopted in
this research because they cover the most important dimensions that have been
addressed in the MAIS literature and have been reasonably widely accepted in the
data quality field. Therefore, quality data in MAIS in this research means accurate,
timely, complete, and consistent data.
Following are the six attributes of successful information systems according to the
Petter, DeLone and McLean (2008):
1. System quality – the desirable characteristics of an information system such as
ease of use, system flexibility, system reliability, and ease of learning, as well
as system features of intuitiveness, sophistication, flexibility, and response
times.
2. Information quality – the desirable characteristics of the system outputs such
as relevance, understandability, accuracy, conciseness, completeness,
understandability, currency, timeliness, and usability.
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3. Service quality – the quality of support users receive from the IS department
and IT support personnel such as responsiveness, accuracy, reliability,
technical competence, and empathy of the personnel staff.
4. System use – the degree and manner in which staff and customers utilize the
capabilities of the system such as amount of use, frequency of use, nature of
use, appropriateness of use, extent of use, and purpose of use.
5. User satisfaction – users’ level of satisfaction with reports, Web sites, and
support services such as the most widely used multi-attribute instrument for
measuring user information satisfaction can be found in Ives et al. (1983).
6. Net benefits – the extent to which the system is contributing to the success of
individuals, groups, organizations, industries, and nations such as improved
decision- making, improved productivity, increased sales, cost reductions,
improved profits, market efficiency, consumer welfare, creation of jobs, and
economic development.
4.1.4 Traditional versus sophisticated MAIS
Management accounting information systems (MAIS) have traditionally been
regarded as an important part of the management process, critical to the success of
organizations. Good strategies required to achieve competitive advantage need to be
supported with appropriate organizational factors, including effective MAIS
(Chenhall and Langfield, 1998; Jermias and Gani, 2000). The traditional MAIS using
techniques such as single volume-based, factory overhead rates for costing products
and basically financial performance measures for measuring performance have come
under criticisms. Critics have argued that these management accounting techniques
have been in place since 1925, when factories were highly labour intensive and low
product diversity and are therefore unlikely to provide useful information for
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managing the modern company’s operation for competitive advantage (Johnson and
Kaplan, 1987; Cooper and Kaplan, 1988).
Some researchers have suggested that rather than assist the modern manufacturing
initiatives to succeed, the poor performance of these entities may be traceable to their
continued reliance on the traditional design of MAIS. They argued that these MAIS
fail to provide appropriate goals, performance measures, or reward systems (Kaplan,
1983; Johnson and Kaplan, 1987); provide distorted product cost information which,
can result in managers making decisions that may constitute bad competitive strategy
for the business (Cooper and Kaplan, 1988; Goldratt and Cox, 1992; Kennedy and
Affleck-Graves, 2001); or even diminish a plant’s total efficiency (Goldratt and Cox,
1992). As suggested by one of the most vehement critics, cost accounting information
provided by such systems is “the number one enemy of productivity” (Goldratt, 1983,
cited in Edward and Heard, 1984, p.44).
Following these arguments, more sophisticated designs of MAIS were offered as
improvements on the traditional MAIS design. These were meant to provide more
detailed and more frequent costing information with a broader focus including
financial as well as non-financial performance information. Such systems incorporate
management accounting (MA) techniques as: the activity based costing (ABC), which
uses multiple cost drivers, rather than the single factory/departmental overhead rates
for absorbing overhead; the balanced score card (BSC), which emphasizes
nonfinancial measures of performance in addition to the financial measures; the
theory of constraints (TOC) and its associated throughput accounting (TA) with its
focus on three measures of performance described as throughput (sales minus totally
variable costs), inventory and operating expense.
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The prior researches gave empirical evidence that using sophisticated MAIS was
more when facing uncertainity high situation, for example intensity of market
competition (Chenhall and Morris, 1986). In high condition of the intensity of market
completion, managers need the sophisticated MAIS for decision making. The
traditional accountancy information and the less sophisticated MAIS were used more
precisely by managers for decision making in low conditions of the intensity of
market completion.
In sum, while more traditional management accounting information systems used to
focus on financial and historic information about events within the organization,
modern management accounting information systems also provide external, non-
financial and future-oriented information (Atkinson et al., 2001; Chenhall and Morris,
1986; Mia and Chenhall, 1994).
4.1.5 Usefulness of MAIS
The usefulness of management accounting for decision- making in the context of
management accounting information systems has been a point of study by many
researchers. Mia and Chenhall (1994) state that the role of the management
accounting information systems has evolved from a historic orientation incorporating
only internal and financial data to a system meant for attention-direction and problem
solving tasks. In that new, future oriented role these systems also need to incorporate
external and non-financial data focusing on marketing concerns, product innovation
and predictive information related to decision areas.
In the last two decades, management accounting studies have received considerable
attention. The findings of these studies highlight a significant role for management
accounting information systems in organizations in which management accounting
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information is now used in planning, decision-making, control, performance
measurement and business strategy in most organizations (Akbar, 2010). Thus
Manager used the MAIS for decision making. It’s about product pricing, market
demand forecasting, market planning, purchasing of raw material, product planning
and improvement of organization infrastructure (Mia and Clarke, 1999).
Result of Mia and Clarke’s (1999) study expressing that usefulness of MAIS which
could assist the company for the implementation of their plans in response to the
competitive environment. Kaplan (1983) described MAIS as a part of the
management control system (MCS) whose function is to increase organizational
effectiveness by providing useful information for management planning and control.
MAIS are expected to add value to organizations, through ensuring the effective use
of resources to gain competitive advantage.
A fundamental purpose of managerial accounting is to enhance firm value by ensuring
the effective and efficient use of scarce resources. Thus, managerial accounting
information systems should provide information that improves employees’ abilities to
make organizationally desirable decisions, thereby enabling employees to achieve the
organization’s goals and objectives (Horngren, Foster and Datar, 2007).
Additionally, managerial accounting information systems should provide information
that helps align the interests of employees with owners by directing employee effort
and attention to activities that benefit the organization (Atkinson, Kaplan and Young,
2005). Viewed in this light, the information produced by a managerial accounting
information system serves two important roles in an organization: (1) to provide some
of the necessary information for planning and decision-making, and (2) to motivate
individuals (Zimmerman, 2003).
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According to Banbury and Naphiet (1979), the management accounting information
system is useful to communicate within the organization to achieve financial goals. It
is also useful as a performance measurement tool in an organization. In the same vein,
Collin (1982) noted that the management accounting information system is useful in
communicating role expectations and organizational climate. It could also be used for
motivational purpose associated with role performance. Both attributes of MAIS,
which are usefulness and its availability to managers, are very important. In the aspect
of the availability, it is important because it could assist managers to make a wiser
decision based on the information provided. The information available must be very
precise and timely in nature. This will avoid miscommunication among managers
from different departments. Furthermore, it will allow information sharing among the
managers in each department and sub-unit.
Modern management accounting information system can serve as a two-way
communication system between senior management and subordinate managers.
Subordinate managers get information on the company′s objectives as soon as the
objectives are clear and senior managers receive regular information - which is not
only relevant for financial reports - on performance in the different parts of the
organization. So, the use of management accounting information by chief executive
officers (CEOs) is particularly important as they perceive and interpret information
for the entire company and take action based on this information. Due to their position
they have the greatest capacity to affect their company’s behavior and thus,
performance (Tripsas and Gavetti, 2000).
Having a good management accounting information system will ensure the
availability of necessary information in a timely manner, thus helping them make
better decisions for the companies, especially in time of crisis. It is very obvious that
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the role of management accounting information system on managerial decisions
should be considered as an important subject to be studied.
4.2 Previous Studies
4.2.1 Studies related to cost accounting system and pricing policy
Ersoy et al. (2006) have conducted a study on 51 companies from largest 500
industrial enterprises in Turkey. Their study showed that (1) direct materials cost has
the largest portion in manufacturing costs, followed by manufacturing overhead and
direct labor costs, (2) the most widely used overhead allocation base is units produced
(30 percent), followed by direct labor hours (23 percent), direct machine hours (15
percent).
Ngu (1997) conducted a study on the topic of product cost and in it, he identified
importance of a product cost to the decision making process of the company. The data
used were got from primary and secondary sources and had been analysed using
quantitative and qualitative means. In the study, he made the point to differentiate the
various costing methods that can be used to come out with the product cost along with
job costing. The study revealed that companies making one of a kind or special order
products use job costing.
Uyar (2008) conducted a study in Denizli, Turkey. The study found that 30
companies out of 86 (35 percent) use process costing, 23 companies (27 percent) use
job costing, and 17 companies (20 percent) use both methods. The same study showed
that most widely used overhead allocation base is units produced (45 companies out
of 86), followed by direct material costs (14 companies out of 86), direct machine
hours (7 companies out of 86), and direct labor costs (7 companies out of 86).
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Another important finding of this study is that the largest share in manufacturing costs
belongs to direct materials costs.
Gorpinpaitoon (1982) made a study on the use of job costing in the shipbuilding
industry in Thailand. His study was aimed at examining the costing method used by
shipbuilding firms in Thailand in order to ascertain the principle, the costing method
and its problems. This study was made through direct observation of the actual
operations and the interviews of the personnel involved in that industry. At the end of
the study, it was realised that the costs of direct materials and direct labour are
charged to the job, but factory overheads are accumulated and allocated to each job on
the basis of direct labour cost or as a percentage of work finished.
Dalci and Tanis (2008) argued that advancements in information technology (IT)
have enabled companies to use computers to carry out their activities that were
previously performed manually. Accounting systems that were previously performed
manually can now be performed with the help of computers. Therefore, improvements
in the information technology have facilitated the use of cost and management
accounting procedures.
Govindarajan and Anthony (1983) found in their survey of Fortune 1000 companies
that 82% of the respondents priced their products based on full costs. Only 17% of the
respondents indicated that they rely on variable costs for their product pricing
decisions.
Shim and Sudit (1995) found that about 70% of the companies used full cost-based
pricing, 12% used variable cost-based pricing, and 18% used market-based pricing.
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4.2.2 Studies related to usage of management accounting techniques
Ghosh and Chan (1997) have conducted a study in Singapore companies. They
indicated that a general improvement was made in the management accounting
practice in Singapore, where more companies were employing various accounting
techniques in managing the business affairs. However, the new techniques such as
Total Quality Management (TQM) and Activity-Based Costing (ABC) were slowly
being accepted and used by the Singapore local companies, and these local companies
continue to lag behind the multinational companies.
Chan (2002) conducted a study in Singapore companies to investigate the
management accounting practices of companies in that country. The results of the
study showed that there was a little improvement in the practice of management
accounting since 1997. In addition, it was found that Singapore companies were
ineffective in the use of costing tools and that the local Singapore companies were
avoiding the use of advanced management accounting techniques. This is because the
advanced techniques would involve with high level of complexity and a high amount
of resources were needed for its implementation.
Triest and Elshabat (2007) have done a study on 40 industrial companies in Egypt.
This study indicated that cost accounting information in Egypt is available at a basic
level, and used more for external (pricing) purposes than for internal (performance)
purposes. They also found that the use of advanced cost accounting techniques such
as activity-based costing system seem absent.
Joshi (2001) has conducted a comparative study in manufacturing companies in India.
The results indicated that Indian manufacturing companies rely heavily on the
traditional management accounting techniques such as variable costing, budget for
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day-to-day operations, capital budgeting tools, return on investment based
performance evaluation, and performance evaluation. However, the adoption rates of
recently developed practices such as shareholders’ value analysis, performance
evaluation (qualitative measures), product life cycle costing, back flush costing,
activity based budgeting, value chain analysis, benchmarking and balanced scorecard,
have been rather low and slow.
Hossain et al. (2006) have conducted a study on management accounting practices in
the listed manufacturing companies of Bangladesh. The results of this study have
revealed that all sectors fail to practice some newly developed techniques. They have
suggested improving and fastening the management accounting practices.
Wijewardena and Zoysa (1999) conducted a comparative analysis of management
accounting practices in Australia and Japan. They investigated the differences in the
adoption of management accounting techniques through a survey questionnaire which
was mailed to 1000 largest manufacturing companies in each country. The size of the
company was based on total assets. A total of 217 Japanese companies and 231
Australian companies responded to the 31 questions asked covering various aspects of
managerial accounting techniques.
The results of the comparative survey revealed that management accounting practices
of Australian companies placed emphasis on cost control tools (e.g. budgeting,
standard costing and variance analysis) at the manufacturing stage while Japanese
companies focused attention on cost planning and cost reduction tools such as target
costing at the product planning and design stage. This finding is in agreement with
another study of Howell and Sukarai (1992) that “Japanese companies seem to
understand better than their western counterparts that cost should be managed and
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avoided during the product planning and product cycle stages rather than when
products have entered full scale production”. Another noteworthy difference that
emanated from the survey was that activity-based costing (ABC) appeared to be
popular among Australian companies while it was rarely used in Japanese companies.
Despite the decreased labor component in the manufacturing cost structure,
manufacturing companies in both countries seemed to allocate factory overhead
mainly on the basis of direct labor.
Adler, Everett and Waldron (2000) have conducted a survey that asked
management accountants, in New Zealand manufacturing businesses, to indicate the
techniques adopted in their business. While many studies have focused on particular
techniques such as ABC or target costing, Adler, Everett and Waldron provided a
questionnaire that included a vast array of management accounting techniques to
provide a fuller set of response options. Results indicated that traditional management
accounting techniques, such as full costing, direct costing and standard costing were
found to be used more often than advanced management accounting techniques, such
as strategic management accounting.
Chandra and Mazumder (2007) examined the status of use of management
accounting techniques in the manufacturing enterprises in Bangladesh. It has been
discovered that modern techniques like Activity-Based Costing, Target Costing, Just-
in-Time (JIT), Total Quality Management (TQM), Process Reengineering and The
Theory of Constraints (TOC) were not used in public and private sector
manufacturing enterprises but a few Multinational Corporations (MNC) are using
some of techniques like JIT and TQM. Also traditional techniques like ratio Analysis,
Standard Costing, Cash Flow Analysis were found widely used.
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Chenhall and Langfield (1998) conducted a survey in Australian manufacturing
firms to identify the extent to which they have adopted certain traditional and recently
developed management accounting practices. The results of the study indicate that the
overall rates of adoption of traditional management accounting practices were higher
than recently developed techniques. However, newer techniques such as activity-
based costing were more widely adopted.
Drury et al. (1993) conducted a survey in U.K manufacturing firms. The study found
that allocation methods such as plant wide rates and labour based rates are being used
because of their simplicity. ABC was widely considered, but not used extensively.
Standard costing, payback analysis, and target profit and return on investment were
widely used. The survey by Drury et al. is consistent with a similar study in1990
found that target costing and ABC were widely used.
Farjana and Amran (2011) conducted a study to measure the significance of
management accounting techniques in decision making of the selected manufacturing
organizations in Bangladesh. The findings of the study reveal that cash flow statement
analysis, ratio analysis, budgetary control, CVP analysis, variance analysis and fund
flow analysis have been frequently used high-ranking techniques.
Farjana and Rehana (2010) have made a comparative analysis in the variability of
management accounting practice in manufacturing and service industries. The
findings reveal that ratio analysis, budgetary control, CVP analysis, variance analysis
and fund flow analysis are used frequently in managerial functions.
4.2.3 Studies related to information characteristics of MAIS
Chenhall and Morris (1986) studied managers' needs for their organizations' MAS
information. They identified four dimensions of information- scope, timeliness,
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aggregation and integration. Using these four dimensions, they developed and tested
an instrument to measure perceived usefulness of MAS information. They argued that
managers would prefer strategically useful information which includes broad-scope,
timely, aggregated and integrated information. The findings of the study found that
the type of information perceived to be useful by managers was broad in scope and
timeliness. This study made an important contribution to management accounting
research by arguing that the broad characteristics of MAS would influence the design
of MAS. It concluded that such conceptualization can provide a common basis for
comparing MAS in different organizations and industries.
Chong (1996) has examined a study on the interactive effects of management
accounting systems design and task uncertainty of managerial performance. The
findings indicated that, under circumstances of high task uncertainty, the extent of
using broad-scope MAS information resulted in effective managerial decisions and
improved managerial performance. Whereas under a condition of low task
uncertainty, the extent of using broad-scope MAS information resulted in information
overload which was dysfunctional to managerial performance.
4.2.4 Studies related to the use of MAIS
Gaidiene and Skyrius (2006) have conducted a survey study on the usefulness of
management accounting information: users’ attitudes. The study investigates the role
and development of management accounting and the usefulness of its information
perceived by managers. The management accounting system is characterized in terms
of information. These characteristics are: scope, timeliness, the level of aggregation,
and information which assists integration. The results of the study showed that all
interviewed managers’ perceived management accounting (economic and non-
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economic) information as useful. However, the level of their scores has been higher
than that of accountants.
Sajady et al. (2008) conducted a study on the effectiveness of accounting information
systems of finance managers of listed companies at Tehran Stock Exchange. The
findings of the study indicate that implementation of accounting information systems
at these companies caused the improvement of managers’ decision-making process,
internal controls, and the quality of the financial reports and facilitated the process of
the company’s transactions. The results did not show any indication that performance
evaluation process had been improved.
Subramaniam (1993) has examined the gap between the perceived usefulness of
MAS information by managers and the extent of availability of information. The
results of the study showed that there was a significant MAS adequacy gap in the
manufacturing industry.
Choe (1996) conducted a study on the importance of the relationships among
performance of accounting information systems, the result showed that the use of
information system a statistically significant influence on the performance for the
firms. The findings of the study concluded the following results: 1) There is a
significant relationship between the size of the firm and the AIS application 2) There
is a significant relationship between the ability of the employees and the AIS
applications.
Hayes (1977) has conducted a research on the role of managerial accounting in
business organizations which generally is perceived to be the provision of information
for decision making by various managerial levels of the organization's hierarchy. The
findings indicated that the management accounting information is perceived as an
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important element to have, in helping the organization particularly the managers to
communicate with their colleagues in decision-making process.
4.3 Chapter Summary
In Chapter 4 the theoretical concepts and studies related to the role of management
accounting information system were reviewed. The review includes the theoretical
concept of MAIS such as the concept of MAIS, operational model and characteristics
of MAIS, factors influencing data quality in MAIS, traditional versus sophisticated
MAIS, and usefulness of MAIS; and various related studies conducted in this
important field of research under the headings of cost accounting system and pricing
policy, usage of management accounting techniques, information characteristics of
MAIS, and the use of MAIS.
The next chapter presents the research design and methodology associated with this
research.