2. COST ACCOUNTING CONCEPTS FOR IS ORGANIZATIONS › 2.4 Transaction Accounting › 2.4.2 Implementing Transaction Accounting › 2.4.2.5 Cost Study and Administration

2.4.2.5 Cost Study and Administration

The many benefits and advantages of transaction accounting
should be obvious by this time.  Equally obvious, however, is
the associated cost of implementation and administration.
Implementing and administering a transaction accounting
system is equivalent in scope to implementing and
administering an industrial manufacturing cost accounting
system.  Consequently, the associated manpower and potential
organizational changes required for transaction accounting
must be considered.  The following points address the
organizational and political considerations of transaction
accounting.


COST STUDY AND ADMINISTRATION GROUP

Before you decide to evolve or migrate to transaction
accounting, you should realize the overall importance and
impact of that decision on your organization.  We recommend
that you establish a separate functional entity, which
reports to the Director of Data Processing, to administer the
transaction accounting process.  It is not necessary, or even
desirable, to have the personnel who maintain the resource
measurement and cost accounting systems under the auspices of
this group; however, regardless of where the personnel for
those systems report within the organization, the cost study
and administration group should be responsible for
establishing guidelines and objectives for those systems.
The responsibilities of this group should include:

o Defining accounting policy

o Defining operational specifications for resource management
  systems, cost accounting systems, and transaction logging
  facilities

o Identifying transactions

o Determining the standard cost and charging rates

o Periodically auditing existing costs and charges

o Negotiating charging rates with the user community
If transaction accounting is to be effectively employed, it
is essential to realize the importance of this undertaking
and properly delegate the authority and responsibility to the
cost study and administration group.  This high level of
control is necessary because, once transaction accounting is
implemented, it becomes an integral part of the data center's
operation and effectiveness.

STANDARD COST AND CHARGE PROCEDURE

As new applications are developed, an additional
consideration is added to the application development
responsibilities:  accounting for the transactions (see
Section 2.4.2.3, Transaction Logging Facilities).  It is the
responsibility of the cost study and administration group to
develop the costs and charges of the transaction prior to
production operation.  This effort is no different from that
used in manufacturing processes today where pilot systems are
tested and costed prior to implementation.

The considerations that may be included in the standard cost
and charge procedure are:

o Identifying and defining the transactions

o Defining and implementing transaction logging facilities

o Implementing the necessary resource measurement systems
  (for example, if this is the first IMS application, an IMS
  transaction-based resource measurement tool will have to be
  installed)

o Integrating the resource management system data into the
  cost accounting system, with the necessary administrative
  tasks addressed to establish the appropriate cost explosion
  tables (see Section 2.3.2.2, Cost Accounting Systems)

o Determining costs and charging rates, and negotiating with
  the responsible user groups

o Integrating the charge-out system

While the initial rate determination phase for establishing
an accurate and representative standard charge is an
extensive and arduous project, it is a crucial one.

PERIODIC COST AND CHARGE AUDIT

Standard charges will, over time, fall out of synchronization
with their actual processing costs.  This can easily result
from any of the following reasons:

o Modifications in the processing techniques of the
  applications systems

o Changes in the "projected" processing volumes upon which
  the standard costs and charges have been based

o Changes in the software and hardware configuration used to
  process the application systems

In attempting to consider this problem, there are several
solutions to evaluate, including:

o Automated variance analysis, which reports significant
  variation between the standard and actual costs on an
  exception basis to the cost study and administration group.
  In this way, the group has a predefined list of those
  transactions that may require a rate change.

o Periodic samples of charges and costs may be used to
  determine whether a significant variation exists between
  the standard and actual costs.  If a sample does find such
  a variation, you should pursue further measures and
  evaluation.

o User-requested rate evaluation may be required when a user
  seriously challenges the standard charges set by the data
  center.  In this case, the transaction in question would be
  completely reevaluated from a cost and charging standpoint
  to determine if there is a discrepancy.

Each of the above mechanisms provides the cost study and
administration group a means to evaluate and calibrate the
standard costs and charges that are in use.