Management Information System In Mcdonalds Information Technology Essay

Management Information System In Mcdonalds Information Technology Essay In any organization, the role of information in decision making is crucial. All the effective decisions are made on the basis of timely, accurate and relevant information. An organization where the relevant information is not available, it leads to poor planning, poor priority of needs, inappropriate decision making, and defective scheduling of programs and activities. The importance of information for proper decision making led to the development of management information system for organizations. The management information system in decision making aims to develop a system for the viable and effective use of modern information approach in the modern management practices (Laudon and Laudon, 2009). Management Information System (MIS) is concerned with the streamlined process of collecting, processing, storing and transmitting the relevant and required information to support entire management operations in any organization. Management Information System comprises of three resources: Academically, management information system and decision making is commonly referred to the automation of human decision making including Decision Support Systems, Expert systems and Executive information system (Laudon and Laudon, 2009). Criteria to select data and information to support decision making There is certain criterion which must be followed in order to select data and information. The criteria include following points: Information required Source of information Reason for which that particular source collected the information The problem which will be solved by that information Evaluation of different sources for acquiring best information along with best format and mode for information Parts of information which will be used Additional information required Presentation of information in order to understand the situation and take decisions ((Laudon and Laudon, 2008) Impact of Information Management System in an organization The Management Information System is being used extensively by many businesses worldwide. The MIS is designed by the top management and is used as a tool for accumulating and assembling facts and figures about all the important business processes including: Financial management Inventory management Technical foundation Asset management Forecasting Time and expense management Procurement Work force management The implementation of Management Information System in an organization ensures the appropriate flow of information to relevant departments and people without bottlenecks. This helps in making decisions not only at internal level but at external level too (Laudon and Laudon, 2008). The entire process of MIS provides the complete, reliable, timely and quality information to decision makers. The four types of computer based management information systems used commonly in organizations are: Transaction processing system Operating information system Expert system Decision support system The Management Information System impacts the organization in following ways: The MIS in an organization ensure the accurate and timely transaction processing. The processes become efficient as there are fewer chances of duplicate data entry and maintenance. The MIS in an organization helps in streamlining records and accounting management. The business processes become standardized due to MIS. MIS provides interactive support to managers which help them in decision making. MIS provides a systematic and easy way to dig out critical information as per specific requirements in preferred formats. MIS due to its time saving feature enables the organizations to gain competitive advantage over others. Although McDonalds has a market share in South Asia but it needs to do more research and gather information regarding the flavors to be introduced, customer expectations and other relevant market information. After collecting this information, this food chain needs to communicate this information efficiently to its employees in order to have the internal opinions for final decision making (OBrien and Marakas, 2008). By collecting information along with the data and information criteria, the business will be able to have a greater level of insight into how business actually works. Importance of information sharing within the organization Every organization has different hierarchical levels constituting managers, executives, employers, employees, administrative staff and lower staff. These levels in an organizational structure are developed for the sake of job description and designations in order to make every employee, manager and executive accountable of his/her actions. Various departments in an organization have their own sets of information which are of formal and informal nature. This information usually consist of work description, company policies, rules and regulations, budget for specific department, targets for specific department, goals for department and much more (McLeod and Schell, 2006). For any organization to be successful, interaction between different business departments or units is essential. The harmonized communication within the organization leads to better understanding of different jobs which are being carried out. The employees understand their perspective goals and the contribution of every department in accomplishing those goals. The inter-departmental communication helps in developing a team force directed towards achieving the goals. For achieving goals, formal information must be communicated along departments in order to have opinions from the employees as they being part of the organization could come up with better feedback. In addition to this, the information sharing within the organization has importance in the following way: By sharing information within the organization, inter-organizational communication and networking will improve. The communication between different organizational levels will support successful management of business and business operations. The information sharing within the organization will help in the sufficient use of executive resources. The sharing of information in an organization between different departments will increase the overall ability to make rational, sound and informed decisions involving combination of complex factors. The sharing of information will also enhance confidence and speed of decision making as well. The time factor will reduce and more work could be done as the work force will know every business dimension. By knowing every department and its role, the customer service will flourish as customer service agents will be able to answer every question easily. This will also improve the personnel relations with the organization as every employee will understand the nature of work and individual contribution of every department. The sharing of information will help bring clarity in communication within the organization as every department would be able to understand common terms and terminology. With such sharing, the business operations will develop higher degree of professionalism. (OBrien and Marakas, 2008) Although sharing information has been promoted in most of the organizations but there is a need for guidance when it comes to information sharing. The organizations must understand that employees must be confident that their personal information has been kept in privacy and secure from being accessed by any other employee. The privacy rights of every employee need to be maintained. The organizations must take the employees in confidence regarding the share of information. In this, the employees must have a clear idea how their personal data might be accessed or used by the company. Same is the case with work related information sourcing, sharing and storing. Some of the work related information of other departments must be communicated in order to streamline the processes to achieve the organizational goals. However there are certain decisions and approaches applied in department judging the requirement of the work. Such information must not be shared unless proper consent has been g iven by higher management. The employees must only share such information with an open consent of higher officials (McLeod and Schell, 2006). Similarly, the organization need to streamline and direct which information should go to which department. There should be filters in the bulk of information so that the concerned employee or department receives the information only. The information of sensitive nature must be kept safe with secure privacy system so that only relevant higher management could access it. Format for offering information For any organization, choosing information sharing format must be based on underlying condition according to which a data format should only be approved for information preservation if it is fully known to the organization and the authority in charge of preserving information. There are various information sharing formats: Code Coding Encoding Metadata Publicly standardized format Published format Standard Mandatory statement These and other formats are available to organizations for offering information. However the organization must ensure that the format used must be clear to them in terms of its functioning. McDonalds must promote information sharing within departments in order to know their opinions so a better product could be launched. Use of information to support strategic decision making Decision making for any organization is the selection of course of action. The process of decision making produce a final choice and this choice can be an opinion or an action. The decision making process must be routed down to lowest possible level in the organization. But for every decision in an organization, proper and relevant information is required based on which analysis could be made and further implemented. Producing data and information should not be an end in itself but it should be made an integral part of the performance management, operations and governance arrangements of an organization. Organizations that pay central attention to the use of information while making decisions often end up making reliable choices. However, good quality data is an essential ingredient when it comes to development of reliable decision. The data must be relevant and perfect for the purpose with timely and accurate representation. In addition to this, an organization must reach for a bala nce between the importance of information required and cost of collecting such data (Haag and Cummings, 2009). Use of information to support strategic decision making could be achieved by following this timeline: Identify the decision to be made along with the goals that organization has to achieve through the decision. In this regard, determine the limitations and scope of the decision. In case of McDonalds, they can use this technique before launching the new product. They can decide if the new product should be launched in proper market or just test market. On these lines, the company needs to be very clear about their goals as well. Get as many facts as you can about the decision an organization is going to take. McDonalds must go for detailed information regarding their performances in Asian region to get the drift of their problem. After collecting these facts, the organization must communicate these facts to employees of every department in order to get the opinion on the launch of the product. After getting the facts, develop choices by developing alternatives. McDonalds can change the ingredients of their products in order to prepare different flavors. Along with identifying alternatives, create as well. This is the evaluation phase of every alternative. McDonalds now need to consider the negative aspect of every alternative (cost, problems, consequences, time needed etc) and the positives (time saved, money saved, creativity, employees happy, customers happy etc). In decision making, there is always some uncertainty regarding the choice made. So the risk comparison amongst the many alternatives must be completed before making the choice. The choice with minimum risk along with other positive aspects would work in the end. Finally take the decision. After taking the decision, implement it and then evaluate the implementation. Once the organization follows this process, it will become part of every strategic decision making. The aggregate of this information can further be used to predict trends and patterns. In case of McDonalds, they can take up this approach and use the data and information in future before launching their new product in a problem area. By following these steps, McDonalds will have a an information pool from all business processes including financial, human resource, inventory, logistics, quality control, resources etc giving out a perfect base to McDonalds in making future strategic business decisions (McDonalds, 2011). To support the strategic business decisions, there are various decision making tools and techniques which can be used. An organization can either use one or a combination of these tools depending on the amount of information and risks in decision making process. The decision making tools and techniques come in various forms and can help the organization in taking the core strategic business decision. Some of these tools are: Cost benefit analysis model Weighted matrix BCG Matrix Decision support system Decision trees SWOT PEST PMI- Pluses, minuses, interesting points Paretos Analysis Six thinking hats Mind mapping McDonalds can use all these tools and techniques in order to expand their market share in Asia region. The need is to do research in every dimension and communicate that information within the organization. There should not be any bottlenecks within the organizational communication. The decision making process would become easier if all the above steps are streamlined within the given period of planning and launching the product. By building up credible information in the information pool, McDonalds will be able to expand its operation and market easily. Evaluate and monitor Management Information System The Management Information System in an organization primarily depends on the quality of information and its source which are people, research and other sources. However this system is maintained in an organization by using the Information Technology and Information Systems. These days, due to adoption of Management Information System in all organizations, the financial investments in Information Technology and Information Systems have increased. With the growing significance of Management Information System in organizational infrastructure development, the performance and evaluation of new technology being used in these systems remains a focus for management. The evaluation process of Management Information System requires the appraisal of techniques which are being used in the information system development. The evaluation process takes into account the technologies which an enterprise is using to integrate information systems between and within organizations. The evaluation purpos e includes the costs, benefits and risks associated with the diffusion or adoption of certain technology for information systems and impact assessment through management information system in an organization (Oz, 2008). Information is a vital asset of any organization which helps determine the enterprise in creating new products and services. Information helps the organization to either withdraw from the markets or enter new markets. But information presented in raw form does not serve the purpose. For maximizing the worth of information, it is captured, quantified, analyzed, compiled, manipulated, shared and made accessible. All this requires the strong foundation and network of information systems (Laudon and Laudon, 2009). Along with considering cost for developing the information systems, the organization must consider the following factors in monitoring and evaluation of the management information system and its components: Number of users Modularity of the system Ease in integration of new components in the system Ease to remove outdated component Amount of information to be processed Type of information to be processed Computing power required by different organizational departments The anticipated functional life of components or system User friendly components for people involved For any organization, the management information system must be maintained in a way to minimize downtime. The enterprise must monitor the processing time of information in order to assure the successful implementation of management information system. A vital consideration in terms of monitoring the management information system is the users access to information in the context that which users can access the information. The organization must ensure that the system grants access to different data by applying user-level permission for access in order to avoid any legal issues regarding privacy of the information. For this, the organization can create unique profiles for each user of the management information system with relevant user-level permissions providing proper clearance. The enterprise can administer the MIS by using individual passwords in order to delineate each user along with their level of access rights. In addition to this, identification of tasks performed by each user will be possible with this password system. The user identification process can also help in gaining data, its measurement and assessment about the performance of any user (McLeod and Schell, 2006). One of the most crucial aspect of monitoring the information system is maintaining the communication between the IS staff of the organization that are involved in the technical perspective, and the system users who communicate their needs or concerns in prosaic terminology. The organization need to monitor this situation by eliminating the language barriers between the IS staff and system users with patience, negotiation and understanding. The organization must maintain a centralized body to provide assistance, information and services to the users of the systems. The information which is being stored by an enterprise builds up a current pool for all users. The archived of the information should not only be a place for storage of information but it must be updated from time to time in order to make it useable for current needs and requirements. An information system is more than software or hardware and people who design it, use it and maintain it are the integral part of this system. The staff of IS must be paired with training department in order to upgrade their skills for better application of the information system and its maintenance (Haag and Cummings, 2009). McDonalds after developing the pool of information needs to monitor it so that the company could analyze the information in order to predict the trends and patterns of the future. As the problem McDonalds had to face was due to the lack of reliable and authentic information, so need of the hour is to build a strong management information system.

Price Discrimination Essay

A seller charging competing buyers different prices for the same â€Å"commodity† or discriminating in the provision of â€Å"allowances† — compensation for advertising and other services — may be violating the Robinson-Patman Act. This kind of price discrimination may give favored customers an edge in the market that has nothing to do with their superior efficiency. Price discriminations are generally lawful, particularly if they reflect the different costs of dealing with different buyers or are the result of a seller’s attempts to meet a competitor’s offering. The Supreme Court has ruled that price discrimination claims under the Robinson-Patman Act should be evaluated consistent with broader antitrust policies. In practice, Robinson-Patman claims must meet several specific legal tests: 1.The Act applies to commodities, but not to services, and to purchases, but not to leases. 2.The goods must be of â€Å"like grade and quality.† 3.There must be likely injury to competition (that is, a private plaintiff must also show actual harm to his or her business). 4.Normally, the sales must be â€Å"in† interstate commerce (that is, the sale must be across a state line). Competitive injury may occur in one of two ways. â€Å"Primary line† injury occurs when one manufacturer reduces its prices in a specific geographic market and causes injury to its competitors in the same market. For example, it may be illegal for a manufacturer to sell below cost in a local market over a sustained period. Businesses may also be concerned about â€Å"secondary line† violations, which occur when favored customers of a supplier are given a price advantage over competing customers. Here, the injury is at the buyer’s level. The necessary harm to competition at the buyer level can be inferred from the existence of significant price discrimination over time. Courts may be starting to limit this inference to situat ions in which either the buyer or the seller has market power, on the theory that, for example, lasting competitive harm is unlikely if alternative sources of supply are available. There are two legal defenses to these types of alleged Robinson-Patman violations: (1) the price difference is justified by different costs in manufacture, sale, or delivery (e.g., volume discounts), or (2) the price concession was given in good faith to meet a competitor’s price. The Robinson-Patman Act also forbids certain discriminatory allowances or services furnished or paid to customers. In  general, it requires that a seller treat all competing customers in a proportionately equal manner. Services or facilities covered include payment for or furnishing advertising or promotional allowances, handbills, catalogues, signs, demonstrations, display and storage cabinets, special packaging, warehousing facilities, credit returns, and prizes or free merchandise for promotional contests. The cost justification does not apply if the discrimination is in allowances or services furnished. The seller must inform all of its competing customers if any services or allowances are avai lable. The seller must allow all types of competing customers to receive the services and allowances involved in a particular plan or provide some other reasonable means of participation for those who cannot use the basic plan. A more detailed discussion of these promotional issues can be found in the FTC’s Fred Meyer Guides. Under certain circumstances, a buyer who benefits from the discrimination may also be found to have violated the Act, along with the seller who grants the discrimination, if the buyer forced, or â€Å"induced,† the seller to grant a discriminatory price. Although proof of a violation of the Robinson-Patman Act often involves complex legal questions, businesses should keep in mind some of the basic practices that may be illegal under the Act. These include: †¢below-cost sales by a firm that charges higher prices in different localities, and that has a plan of recoupment; †¢price differences in the sale of identical goods that cannot be justified on the basis of cost savings or meeting a competitor’s prices; or †¢promotional allowances or services that are not practically available to all customers on proportionately equal terms. Under the Nonprofit Institutions Act, eligible nonprofit entities may purchase — and vendors may sell to them — supplies at reduced prices for the nonprofit’s own use, without violating the Robinson-Patman Act. The Health Care Services & Products Division issued a recent advisory opinion discussing the application of this exemption to pharmaceutical purchases by a nonprofit health maintenance organization. Q: I operate two stores that sell compact discs. My business is being ruined by giant discount chains that sell their products for less than my wholesale cost. What can I do? A: Discount chains may be able to buy compact discs at a lower wholesale price because it costs the manufacturer less, on a per-unit basis, to deal with large-volume customers. If so, the manufacturer may have a â€Å"cost justification† defense  to the differential pricing and the policy would not violate the Robinson-Patman Act. Q: One of my suppliers is selling parts at its company-owned store at retail prices that are below the wholesale price that it charges me for the parts. Isn’t this illegal? A: The transfer of parts from a parent to its subsidiary generally is not considered a â€Å"sale† under the Robinson-Patman Act. Thus, this situation would not have the required element of sales to two or more purchasers at different prices. †¢Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦.. Definition of ‘Price Discrimination’ A pricing strategy that charges customers different prices for the same product or service. In pure price discrimination, the seller will charge each customer the maximum price that he or she is willing to pay. In more common forms of price discrimination, the seller places customers in groups based on certain attributes and charges each group a different price. Investopedia explains ‘Price Discrimination’ Price discrimination allows a company to earn higher profits than standard pricing because it allows firms to capture every last dollar of revenue available from each of its customers. While perfect price discrimination is illegal, when the optimal price is set for every customer, imperfect price discrimination exists. For example, movie theaters usually charge three different prices for a show. The prices target various age groups, including youth, adults and seniors. The prices fluctuate with the expected income of each age bracket, with the highest charge going to the adult population. Price Discrimination When you were young, did you ever order from the children’s menu in a restaurant? When a family with small children goes to a restaurant, they are often given a children’s menu in addition to the regular menu. If they order two similar items, one from each menu, they will find that the item ordered from the children’s menu will be a bit smaller, but its price will be much smaller. In fact, it would often be worthwhile for the entire family to order from the children’s menu, but they cannot. Restaurants usually only allow children to order from it.1 Why do restaurants use children’s menus?  Economists doubt that restaurant owners have a special love for children; they suspect that the owners find offering children’s menus to be profitable. It can be profitable if adults who come to restaurants with children are, on the average, more sensitive to prices on menus than adults who come to restaurants without children. Children often do not appreciate restaurant food and service, and often waste a large part of their food. Parents know this and do not want to pay a lot for their child’s meal. If restaurants treat children like adults, the restaurants may lose customers as families switch to fast-food restaurants. If this explanation is correct, then restaurants price discriminate.2 A seller price discriminates when it charges different prices to different buyers. The ideal form of price discrimination, from the seller’s point of view, is to charge each buyer the maximum that the buyer is willing to pay. If the seller in our monopoly example could do this, it could charge the first buyer $7.01, the second buyer $6.51, etc. In this case the marginal revenue curve becomes identical with the demand curve. The seller will sell the economically efficient amount, it would capture the entire consumers’ surplus, and it would substantially increase profits. The Simple Analytics of Monopoly-Repeated OutputMarginal CostMarginal Benefit Every seller would price discriminate if there were not two major obstacles standing in the way. First, the seller must be able to distinguish between those buyers who are willing to pay a high price from those who are not. Second, there must be substantial difficulty for a low-price buyer to resell to those willing to buy at a high price.3 Because price discrimination is potentially profitable, businesses have found many ways to do it. Theaters often charge younger customers less than adults. Doctors sometimes charge  the rich or insured patient more for services than they charge the poor or uninsured. Grocery stores have a lower price for people who bother to check the newspaper and clip coupons. Some companies, such as firms selling alcoholic beverages, produce similar products but try to promote one as a prestige brand with a much higher price. Electric utilities usually charge lower rates to people who use a lot of electricity (and thus probably have electric stoves and water heaters) than they do to those who use only a little electricity (and who probably have gas stoves and water heaters). Banks offer special interest rates on Certificates of Deposit (CDs) that will not be obtained when one lets a CD roll over. People who are more sensitive to interest rates will take the time and effort to personally renew each maturing CD. To the extent that businesses find ways to price discriminate, they eliminate the triangle of welfare loss and approach the economically efficient amount of production. Thus, the mere existence of monopoly does not prove there is economic inefficiency.

What to Expect From Best Term Paper Writing Service?

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The Function, Anatomy, and Respiration of the Lungs

Americans and Cubans Approaches to the Platt Amendment

The U.S.’s relationship with Cuba has been arduous and stained with mutual suspicion and obstinateness, and the repeated U.S. interventions. The Platt agreement and Castro’s rise to power, served to introduce the years of difficulty to come, while, the embargo the U.S. placed on Cuba, enforced the harsh feelings. The two major events that caused the most problems were the Bays of Pigs and Cuban Missile Crisis. In 1903, the U.S. published the Platt Amendment, which was a set of guidelines for Cuba to follow (Blight 165). The Platt amendment was named after Senator Orville Platt of Connecticut. The U.S. had been occupying Cuba since the Spanish American war in 1898, and Cuba wanted them out, so the U.S. set up eight rules for Cuba to agree†¦show more content†¦The U.S. and the presidency were embarrassed and Castro was made wary of future invasions because of this battle (Blight 126). This triggered a speech by Fidel Castro, on December 2, 1961, where he states that Cuba is adopting communism. As a counter, the U.S. imposed an embargo against Cuba only two months later. The Soviet Union, in 1962, was rushing to catch up with the U.S. in the arms race, (arms being a metonymy for all military weapons), but their missiles were lacking in power. If activated, they could only reach Europe and would fall short of the U.S. Unfortunately, in April the Soviet Union placed their missile on Cuba, only 90 miles from the U.S.! Coincidently, Castro was paranoid of a second attack and was looking for a defense mechanism, so he jumped at the chance to have the Soviet Union’s missiles on his island directed toward the U.S. Therefore, that summer Cuba and the Soviet Union worked together to install missiles in Cuba. On October 15, 1962, a photograph proved the existence of the missile being constructed on Cuba, and for the U.S., the nightmare began. After a week of intense debating with his closest advisors, President Kennedy made a decision. He decided to impose quarantine, of sorts, around Cuba to ensure there were no more missiles arriving. The Soviet Union demanded theShow MoreRelatedAmerica s New Sense Of World Power758 Words   |  4 PagesAbby Thompson Period 5 HOTA Paper After the years of the American Civil War, America embarked on a manifest destiny, 2.0. America decided they wanted to expand their territory across the waters. There were many approaches that were suggested by previous presidents, all with the same goal: World Dominance. The Big Stick idea was brought to light from President Theodore Roosevelt. The plan reflected many of the same impulses that were motivating domestic reforms that were taking place in America. HeRead More Cuba and Tourism Essay3446 Words   |  14 Pagesincome between Cubans and their neighbors to the north. The dollar-based society a tourist economy creates is deeply stratified, and conflicts with the ideals of the Castros socialist revolution. Yet in recent years it has proven to be a good source of hard currency for the struggling economy, and efforts are being made to expand the industry. By promoting tourism, Cuba is taking advantage of its beauty, but is opening itself to unfortunate exploitation. The Playground for North Americans In hisRead MoreThe Consequences Of The Spanish American War Essay2078 Words   |  9 Pagesthe USS Maine in Havana harbor on February 15, 1898. After weeks of fighting on both land and sea, American finally triumphed in both Cuba and the Philippines, and on December 10th, the two sides signed the Treaty of Paris. Even after the Senate ratified the Treaty of Paris in February of 1899, however, the effects of the conflict were far from over (Lawson 2-6). The consequences of the Spanish-American War caused the United States to expand its influence on an international level, creating a more externallyRead MorePresident Franklin Roosevelt And The Great Depression3901 Words   |  16 PagesRoosevelt believed that America has a significant role to play for the rest of the world, and this was not surprising considering his diplomatic political approaches. All through most part of the 1930s, the persistence of the economic woes that faced the United States, as well as the existence of an is olated streak among a good number of Americans and some significant progressive political allies, forced FDR to adjust his internationalist sails. However, the attack by Japan on Pearl Harbor broughtRead MoreMarketing Mistakes and Successes175322 Words   |  702 PagesD program to do so. With its search engine, it raised advertising to a new level: targeted advertising. In so doing, it spawned a host of millionaires from its rising stock prices and stock options and made its two founders some of the richest Americans, just under Bill Gates and Warren Buffett. How did they do it? Starbucks is also a rapidly growing new firm—not as much as Google, but still great—and a credit to founder Howard Schultz’s vision of transforming a prosaic product, coffee, into

American Online Case Study Free Essays

Q1: The major explanations to the reason why AOL was so successful in the commercial online industry comparing to its competitors CompuServe and Prodigy are as follows:  · AOL offered the unique and board range of features such as Online Community, Computing and the like, so their services are relatively differentiated  · AOL kept good relation with its customer because of the easy access to AOL’s online service which only required to have a personal computer, a telephone line, and a computer, and also reflected in AOL’s rate structure which was the easiest for consumers to understand and anticipate, relative to its competitors  · The bargaining power of AOL with supplier is achieved by making strategic partnership with American Express, and so on; and completing its acquisitions of Internet software developers, along with AOL’s growing membership base, in order to strengthen its new interactive services industry by means of pursuing a number of initiatives .  · The threat of new enchant is low, since there is not much service providers, like AOL, acted as middlemen between thousands of content providers and millions of customers, which provided lucrative profits prior to 1995. Q2: There are several crucial changes happened in the commercial online industry in the year of 1995 and after:  · With the advent of the Internet World Wide Web and the entrance of Microsoft Network, content providers had substitution distribution channels that offered greater control over their products  · Under the background that the migration of proprietary services and content to Web sites, the exclusive offerings of AOL was declining, thus it was likely reduce the market share of AOL in the industry and subsequently posed negative effect on its profitability  · Since everyone with a PC was his/her own publisher, customers would sign up for an Internet on-ramp service provided by other companies and they were tend to use the other companies’ browsing software to surf the world’s database, resulted in the situation that content providers were starting to make use of these distribution channels. We will write a custom essay sample on American Online Case Study or any similar topic only for you Order Now Q3. Based on the annual reports and footnotes, AOL’s accounting policy was to capitalize subscriber acquisition costs prior to 1995, which in my view, was not likely to be justified in that period based, for the uncertainty whether ts customers could migrate to the internet still remained since this would probably affect the growth in its subscriber and the profit of its services, although the CFO of AOL attributed the choice to the explanation that the period over which the revenue would be received was matching with the timing the expense, yet there was a rising gap between the reported income and its tax income, except for a big change in its service quality, these two numbers bear a consistent relationship to each other. Q4. The company should shorten the length of amortisation of the acquisition costs instead of extending it. The reason of this assertion are based on the life cycle of the industry which was supposed to be relatively short and because of the constantly cha nging environment of the commercial online industry with huge uncertainties, which was likely to require conservative accounting policy to reflect the financial figures so as to better match revenues with expense. Nevertheless, AOL even extended the amortization period for its subscriber acquisition cost from about 15 months to 24 months, which made it would be tend to face big risks when customers switched to other online service under uncertainty. Therefore, the company’s response seems to be inconsistent with my view. Q5. If AOL followed the policy of expensing subscriber acquisition outlays rather than capitalizing them, there would be a huge amount of subscriber acquisition costs, leading to a comparatively decreasing profit and increase operating loss in the income statement as well as lower equity in the balance sheet for the last same period or compared to its peers, which might lose the attractive looking of the accounting figures when it was eager to raise money from the public market so as to pay its bill. How to cite American Online Case Study, Free Case study samples

Taxation of Intellectual Capital

Question: Discuss about the Taxation of Intellectual Capital. Answer: Introduction: Following assignment presents the tax consequences under the Taxation Government of Australia regarding fringe benefit tax liability for ABC Limited in compliance to Fringe Benefit Tax Assessment Act (FBTAA), 1986 and Taxation Ruling 97/17 of Income Tax Assessment Act (ITAA), 1997. Additionally, the assignment represents allowable deduction on capital expenditures on depreciable asset as per division 40 ITAA 1997. 1: Treatment of Fringe Benefits Tax according to the provisions of TR 97/17 ITAA 1997 and FBTAA 1986 in the hands of ABC Pty Ltd for the year ending 31st March 2015. FBT is calculated on the gross- taxable value of the benefits as measured under the two types- higher gross up rate (type 1) and lower gross up rate (type 2). Higher gross up rate, for the taxpayers who pay Goods and Services tax (GST) on the cost of benefits entitled to claim GST credit. Whereas lower gross up rate is for taxpayers not entitled to claim GST credit on the benefits since the cost is GST free. Whereas certain benefits are exempted and some are taxable if their value exceeds the threshold limits specified under the Act (Hodgson and Pearce, 2015). Accordingly, tax consequences are as follows: Salary $300,000: Remuneration is taxable in the hands of the employee, Mr. Alan for the assessment of income tax. ABC Limited is not liable to pay any FBT for the salary payment as it falls under the exempted Fringe Benefit category (Soled and Thomas, 2015). Payment of mobile phone bill: The allowance paid by ABC Limited $220 per month, inclusive of GST for the phone bill which Alan uses for work purpose only. ABC Limited is liable to pay FBT on such allowance @ 47 % on the taxable value. Also, provided that the entity is entitled to claim input tax credits on the payments inclusive of GST hence, Higher Gross- up rate will be used for taxable value (Pearce and Hodgson 2015). Phone bill (i) $ 2,640.00 ($220.00* 12 months) Higher Gross up rate (ii) 2.1463 Taxable value (i* ii) $ 5,666.232 Tax on Fringe Benefit @ 47% on $ 5,666.232 $ 2,663.129 (Subject to the input tax or GST credits) Assumed that the payment per month is at the beginning of the year, therefore converted the same to annual payment. Payment of Alans childrens education fees: ABC Limited has paid $20,000 annually, as education fees (GST free). Therefore, lower gross up rate will be applicable for the computation of taxable value (Shields and North-Samardzic, 2015). Education fees (GST free) (i): $ 20,000.00 Lower gross- up rate (ii): 1.9608 Taxable value (i* ii) $ 39,216.00 Tax on Fringe Benefit @ 47% on $ 39,216.00 $ 18,431.52 Mobile phone handset: The entity provided a mobile phone handset to Alan worth $ 2,000 including GST. As contained in the provisions of ITAA 1997 and FBTAA 1986, if any benefit used by the employer work purpose only, then such allowance shall fall into the category of exempted Fringe Benefits (Soled and Thomas, 2015). In this case it is not clear whether the handset provided is for work purpose or for personal use. Therefore, the taxability consequence provided as per the circumstances: Option i) benefit for work purpose only: in this case, tax liability for ABC Ltd is nil as the benefit falls into the exempted fringe benefit category (Pearce and Hodgson 2015). Option ii) benefit for personal use: in this option, ABC Ltd is liable to pay FBT on the value derived by considering higher gross up rate as the cost is inclusive of GST (Pearce and Hodgson 2015). Cost of the handset (i) $ 2,000.00 Higher Gross up rate (ii) 2.1463 Taxable value (i* ii) $ 4,292.60 Tax on Fringe Benefit @ 47% on $ 5,666.232 $ 2,017.52 (Subject to the input tax credits or GST credits) Dinner at year-end: ABC Ltd had organized a dinner for its employees and their partners at the end of the financial year. As per ITAA 1997, this expenditure falls into the entertainment by way of food and drink allowance. Hence, ABC is liable to pay fringe benefit tax on the total cost (Shields and North-Samardzic, 2015). Computation of FBT for the year ended 31st March 2015 Total cost of dinner including GST (i) $ 6,600.00 Higher Gross up rate (ii) 2.1463 Taxable value (i* ii) $14,165.58 Tax on Fringe Benefit @ 47% on $ 14,165.58 $ 6,657.82 (Subject to the input tax credits or GST credits) In case ABC Ltd had only 5 employees then the answer to (a) would remain same. It is because the liability of tax on allowances provided to employees does not depend on the number of employees but it depends on the nature of the benefit and purpose of the use of benefit as specified under the ITAA 1997 and FBTAA 1986 (Shields and North-Samardzic, 2015). Hence, the tax liability consequences for the ABC Company would be same as derived in the solution (a). If the clients of ABC Limited also attend the year-end dinner along with the employees then there would be different treatment of tax liability. In this case, the expenditure on dinner would not fall into the category of fringe benefit, as it is difficult to segregate the cost allocation of dinner between employees and clients (Shields and North-Samardzic, 2015). Hence, the cost of dinner would fall into general deduction category while computation of taxable income of the company and the tax on fringe benefit as derived in solution (a) $ 6,657.82 would be a saving for ABC Ltd. 2: Division 40 on Capital allowances of ITAA 1997 serves the objects and principles for deduction on capital expenditure. According to division 40, deduction on capital expenditure is allowed on depreciating asset, which has limited life expectancy. Further, the division under section 40- 365 also provides the provisions on replacement of assets for determination of costs and allowable deductions which specifies that any amount for the sale of old depreciating asset would be allowed as tax deduction only if that old asset was in use or kept ready for use (Thomson, 2015). The tax consequences for Rubber Co. as per Division 40 ITAA 1997 are as under: Cost of machine on 1.1.10 (inclusive of GST) $ 1,100,000.00 Estimated effective life 10 years Accumulated depreciation for 4 years till 1.1.14 $ 440,000.00 (1,100,000/10* 4 years) Net book value on 1.1.14 $ 660,000.00 Hence, deductible allowance will be accumulated depreciation $ 440,000 in the year 2014 for the capital expenditure $ 1,100,000.00 made in the year 2010. On the replacement of the machinery on 1.01.14, the tax consequence is as under: Net book value of the old machinery on 1.01.14 $ 660,000.00 Disposal value (including GST) on 1.01.14 $ 330,000.00 Loss on disposal of original machine $ 330,000.00 ($ 660,000.00- $ 330,000.00) Cost of new machine (including GST) on 1.01.14 $2,200,000.00 Deduction allowed on the capital expenditure $ 330,000.00 Net reportable capital cost of new machine $ 1,870,000.00 Rubber Co. is allowed to claim tax deduction in respect of the new machine is equal to the amount of loss incurred from the sale of old machine $ 330,000.00 as it was already in use. Hence, net capital expenditure in the financial year 2014 would be $ 1,870,000.00. Conclusion: The assignment has been dealt with taxation inference on two different aspects of ITAA1997 i.e. tax liability on fringe benefit and deductible allowance on capital expenditure. In the first solution, ABC Limited is liable to pay tax on certain allowances provided to Alan while for some allowance company was eligible to claim exemption. In the second requirement, Rubber Co. is eligible to claim tax deduction for the capital expenditure incurred on machinery in the year 2010 in terms of depreciation and subsequently, on replacement in the year 2014 at an amount equal to the loss on disposal of old machine. Reference List: Burke, K.C., 2015. Comments on'Taxation of Intellectual Capital:'Better than Consumption-Tax Treatment?. Hodgson, H. and Pearce, P., 2015. TravelSmart or travel tax breaks: is the fringe benefits tax a barrier to active commuting in Australia? 1.eJournal of Tax Research,13(3), p.819. Pearce, P. and Hodgson, H., 2015. Promoting smart travel through tax policy.Tax Specialist,19(1), p.2. Prebble, J. and McIntosh, H., 2015. Is Expenditure to Assess the Feasibility of Constructing or Acquiring Capital Assets Deductible?.Available at SSRN 2583341. Rahi, M. and Islam, S., 2015. Exploring capital expenditure planning process tracking in Robi Axiata Limited. Shields, J. and North-Samardzic, A., 2015. 10 Employee benefits.Managing Employee Performance Reward: Concepts, Practices, Strategies, p.218. Soled, J.A. and Thomas, K.D., 2015. Revisiting the Taxation of Fringe Benefits.Washington Law Review, Forthcoming. Thomson, R., 2015. The Effectiveness of RD Tax Credits.Review of Economics and Statistics, (0).