ࡱ> sur[ Mbjbj *xjj!?l(((>j&j&j&8&&tEx>'(f'"'''000????3J?BD$-G MIEi0.000E 6RR''oE 6 6 60ZR''? 60? 6 6;1>v>'2' p;Vj&1>>,E0E>I2.I> 6RRRR Built-Rite Millworking, Inc. Case for Teaching Accounting Information Systems at Oakland University, Rochester, Michigan Developed by Joseph Callaghan, J.D, Ph.D. Associate Professor of Accounting and Arline Savage, D. Com., CA(SA) Assistant Professor of Accounting The Case of Built-Rite Millworking, Inc.  General Background Built-Rite Millworking, Inc., hereafter referred to as Built-Rite, is a small, but growing, privately-held Midwestern corporation, specializing in the manufacture and installation of a wide variety of cabinets and fixtures. Built-Rite has approximately 60 employees, and is organized as shown in Appendix A. Built-Rite's major classes of customers are: (1) Financial Institutions (Banks) (2) Hospitals (3) Commercial Subcontracting (4) Custom Commercial For commercial subcontracting customers, Built-Rite works for a general contractor, which is usually an architectural or construction firm. Most of Built-Rite's current work (about 70% of sales) results from a competitive bidding process (bidded jobs). The remaining jobs are time-and material-jobs (about 30%). Although Built-Rite's customers are geographically dispersed across the Midwest, most of its installation work is done in Michigan. Management is, however, interested in expanding its market geographically, and is even contemplating international installation work in Canada and Mexico. In addition, the corporation will soon be mass-producing a variety of standard, self-assembly kits for various types of cabinets. It is also wants to reap the benefits of electronic commerce, and plans to the develop of a web site for an internet order and sale system. Certain jobs require that Built-Rite subcontract work. Reasons for subcontracting are special materials installation (e.g., beveled glass work) and installation at the customer site. But, on occasion, normal labor phase work is also "farmed out", especially when the plant approaches practical capacity. Under these conditions, Built-Rite seeks competitive bids from appropriate companies. Consequently, there are jobs where Built-Rite acts in a dual capacity as both subcontractor and as contractor to its own subcontractors. Computing Environment The computing environment currently consists of a LAN of 486 workstation PC's operating in a Client-Server topology. The server is a Pentium III"! machine, running under Windows NT"!. Each Client has access to Windows-based word-processing, spreadsheet, and database (currently Oracle Server"!) applications. Most spreadsheet and word processing documents are stored locally, but the databases and spreadsheet templates are stored on the server. In addition, access is provided to LAN General Ledger Accounting and statistical packages. Finally, a separate 486 machine, running under Windows 98, is used for CAD purposes only. It is linked to the CNC Router's computer, where digital design information is converted to the CAM's format for machine motions. The existing accounting package includes the following modules: (1) Accounts Receivable (2) Accounts Payable (3) Payroll (4) Inventory Control (5) Job Costing These modules are all integrated with the general ledger module to produce financial statements and various managerial reports. Management Concerns Management is concerned about its traditional accounting and MIS systems and has retained you, Student Enterprises, to develop a computerized information system that will assist the business to grow more profitably, with more of a "value-added" emphasis. Management also wants you recommend a software product for developing an integrated business information system (including web-enablement features). The individual case assignments are described next. SECTION 1: CASE ASSIGNMENTS FOR PLANNING Assignment 1: Software Recommendation As part of systems planning, you decide that Sterling Software's COOL:Gen"!, a full life-cycle model-based application development tool, is the most suitable software package for the task at hand. Write a letter to the President of Built-Rite, recommending that the corporation purchase the latest version of COOL:Gen"!. In your letter, explain the advantages of using (1) a systems-development-life-cycle approach for developing business information systems, and (2) the COOL:Gen"! programming development toolset to implement this approach. Hint: a useful information resource is t HYPERLINK "http://www.sterling.com/content/prod_serv_factsheet.asp?plid=2&pid=2&sid=1" \t "_parent" http://www.sterling.com/content/prod_serv_factshe HYPERLINK "http://www.sterling.com/content/prod_serv_factsheet.asp?plid=2&pid=2&sid=1" \t "_parent" et.asp?plid=2&pid=2&sid=1 Assignment 2: The Organization Hierarchy Diagram As A Planning Tool Prepare the existing Organization Hierarchy Diagram (see Appendix A), using COOL:Gen"!. Assignment 3: The Activity Hierarchy Diagram (AHD) As A Planning Tool Identify Built-Rite's highest level functions by doing a first-level decomposition, using the AHD feature in COOL:Gen"! Continue decomposing the business, down to the level of sub-functions. SECTION 2: CASE ASSIGNMENTS FOR ANALYSIS Assignment 1: Acquisition/Maintenance/Payment of Raw Materials The following business area has been chosen for analysis: AMP of Raw Materials. Built-Rite's current system and a description of management requirements for an improved system are given below. Current System "Generic purchasing", i.e., the purchase of raw materials common to a majority of jobs, such as plywood, is done on an ad hoc basis, depending on how low inventory levels seem or on how good a deal is available from a vendor at a particular time. The latter often results in bulk purchases, and Purchasing Manager, Beyer Cheep, generates a purchase order (PO) without a purchase requisition (PR). The request for raw materials acquisition for a bidded job currently comes from job cost estimation. If a bid is successful, Beyer Cheep receives a PR, unique to a particular bidded job, prepared by Bud Ding. The PR contains product descriptions, quantity, bidded purchase price, and (often) vendor name. Beyer Cheep reviews the PR, to determine which raw materials are already in inventory (the result of generic purchasing). If the materials are not in stock, he prepares a PO, based on the information shown on the PR. He goes along with the Bud's choice of vendor, if the vendor is named on the PR. In such cases, he makes sure that Built-Rite has arranged purchase terms with the chosen vendor. If not, Beyer informs Accounts Payable, so that Will Payer can arrange terms and update the approved vendor list. Beyer then mails or faxes the PO to the vendor. Estimates for time-and-material jobs are done by Bill Moore, in the same fashion as for bidded jobs. Copies of all PR's and PO's are sent to Accounts Payable. Built-Rite does not have a formal receiving procedure. Any available Manufacturing employee will accept delivery of an order and will sign the vendor-generated delivery report as proof of receipt. A copy of this document is sent to Accounts Payable, as proof of receipt. The delivered goods are placed in the raw materials store. There are no storeroom personnel, and raw materials are removed from the store as required by the various manufacturing supervisors. No perpetual inventory records are kept. Once the Accounts Payable clerk, Will Payer, receives the PR (optional), PO, and vendor-generated receiving record, he updates the Accounts Payable records. Once the vendor invoice is received, all these documents are matched. Will Payer prepares a check on the due date, which is signed by one of the authorized signatories (Dennis Buildit, Maureen Callaghan, or Beany Counter). The check signatory cancels the supporting documentation at this point. Will Payer mails the check to the vendor, and updates the Accounts Payable records. Will Payer also maintains the approved vendor list. Management Requirements Management wants you to incorporate the following into the information system that you are developing: A perpetual inventory system should be established. The weighted-average method for inventory valuation will be used. Materials requisitions for raw materials should come from a Manufacturing manager or supervisor only (both classified as management employees), and sent to Materials Stores. Any materials items that can be directly traced to a bidded job will have a job number on the materials requisition. Stores will check inventory on hand and decide what needs to be ordered. Stores will issue a purchase requisition for inventory that is not on hand, and items that are on hand will be immediately issued to production. The business rule is that raw materials can only be removed from the storeroom upon receipt of a materials requisition. A stores person (independent of record-keeping and authorization) should be the only person having physical access to the raw materials. Mr. Buildit has agreed to arrange for this control. A new employee, Lee Jones, is appointed to this position. Lee reports directly to Paul Savage. The Purchasing department receives all purchase requisitions and this enables them to aggregate purchase requisitions and issue purchase orders to individual vendors. The business rule is that any particular item on a purchase requisition will not be ordered from more than one vendor. For generic (bulk) inventory items, the Purchasing department sets a minimum order quantity, and the perpetual inventory system triggers a purchase requisition to Purchasing when the minimum level is reached for a particular inventory item. This happens once a day, with all reorder items for that day listed on one request. The stores person should check new shipments when they are received. This person will sign the delivery documentation accompanying the order, as evidence that all goods have been received in good order. This information should be sent to Accounts Payable and Purchasing. Purchasing updates the inventory records for the receipt of materials. The business rule is that partial shipments are not accepted. Any shipment that does not meet specifications is rejected and sent back to the vendor. Required Deliverables: (1) Update the Organizational Hierarchy Diagram, to incorporate any new job positions. Activity Hierarchy Diagram: Decomposition of the function AMP of Raw Materials, to the level of elementary processes. Activity Dependency Diagrams: Prepare ADDs supporting all elementary processes, including the maintenance of RALs (Resources, Agents, Locations). Entity Relationship Diagram (ERD): Create an ERD in support of the AMP of Raw Materials. Include attributes, identifiers and relationships for the various entity types. The data model list for the AMP of Raw Materials. Process Action Diagrams (PADs) for each elementary process, containing the business rules and pseudo-logic of the business events. Assignment 2: Acquisition/Maintenance/Payment of Fixed Assets The following business area has been chosen for analysis: AMP of Fixed Assets. Built-Rite's current system and a description of management requirements for an improved system are given below. Current System The purchase of fixed assets is done on an informal basis. Based on verbal requests from organization unit managers, the president initiates the process by asking Purchasing Manager, Beyer Cheep, to purchase the relevant capital asset. Beyer prepares a PO for the selected vendor, and the President approves the PO. Then, regular purchasing steps are followed (see AMP of Raw Materials). There is no formal receiving procedure for fixed assets. A manager from the requesting organizational unit inspects and accepts delivery of the asset and signs the vendor-generated delivery report as proof of receiving the asset in good order. A copy of this document is sent to Accounts Payable and to Accounting. Once the Accounts Payable clerk, Will Payer, receives the PO and the vendor-generated receiving record, he updates the Accounts Payable records. Once the vendor invoice is received, the documents are matched. Maureen Callaghan arranges for the check to be mailed to the vendor on the due date. Will Payer updates the Accounts Payable records. He also maintains the approved vendor list. Note: The acquisition of financial resources is covered by the function AMP of Financial Resources. Management Requirements Management wants you to incorporate the following into the information system that you are developing: A fixed assets system should be established. Attributes need to be established that support both accounting and tax depreciation. Beany Counter is responsible for maintaining fixed asset records. The business rule is that partial shipments should not be accepted. Any shipment that does not meet specifications is rejected and sent back to the vendor. A copy of the signed receiving record should be sent to Accounts Payable, Purchasing and Accounting. Accounting assigns an identification number to the new fixed asset, as well as other attributes. At the end of its economic life, the asset will be disposed of. Any gain or loss will be recorded, based upon the cash (if any) received. Users should be able to extract reports representing up-to-date depreciation expense, from both an accounting and a tax perspective. Required Deliverables: Activity Hierarchy Diagram: Decomposition of the function AMP of Fixed Assets, to the level of elementary processes. Activity Dependency Diagrams: Prepare ADDs supporting all elementary processes, including the maintenance of RALs (Resources, Agents, Locations). Entity Relationship Diagram (ERD): Create an ERD in support of the AMP of Fixed Assets. Include the attributes, identifiers, and relationships for the entity types. (4) The data model list for the AMP of Fixed Assets. Process Action Diagrams (PADs) for each elementary process, containing the business rules and pseudo-logic of the business events. Appendix A: Key Personnel Organization: BUILT-RITE, Inc. Title: President Name: Dennis Buildit Organizational Unit: ACCOUNTING Title: Chief Financial Officer Manager's Name: Maureen Callaghan GENERAL_LEDGER Title: Supervisor Name: Beany Counter ORDER_ENTRY Title: Supervisor Name: Michael Mahon ACCOUNTS_RECEIVABLE Title: Clerk Name: Will Collect ACCOUNTS_PAYABLE Title: Clerk Name: Will Payer JOB_COST Title: Controller Name: Bill D. Wells PAYROLL Title: Clerk Name: Dewey Payem PURCHASING Title: Vice President of Purchasing Manager's Name: Beyer Cheep MARKETING Title: Vice President of Marketing Manager's Name: Bigger Deal MANUFACTURING Title: Vice President of Manufacturing Manager's Name: Paul Savage MACHINING Title: Supervisor Name: Dewey Work ASSEMBLY Title: Supervisor Name: Bill Der LAMINATING Title: Supervisor Name: Joe Worker FINISHING Title: Supervisor Name: Bill Dem HARDWARE Title: Supervisor Name: Will Bolts INSTALLING Title: Supervisor Name: Connor Dover SUBCONTRACTING Title: Supervisor Name: Bee Busy HUMAN_RESOURCES Title: Vice President of Human Resources Manager's Name: Hiram Wells ESTIMATION Title: Chief Job Cost Estimator Manager's Name: Dan Figiel BIDDING Title: Supervisor Name: Bud Ding TIME-AND-MATERIALS Title: Supervisor Name: Bill Moore Appendix B: The various manufacturing cost categories can be illustrated as follows:           This case is based on a real-life situation. The case information has been disguised to protect the identity of the corporation.  The final price for the job is fixed. Built-Rite bears losses resulting from incorrect estimations.  The selling price is based on actual costs plus a specific mark-up percentage. Although an estimate is given to the customer, the final price is not fixed. 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