BUS 561 King Saud University Re Accommodating Passengers in Thai ABC Airline PPT

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Journal of Information Technology Teaching Cases (2016) 6, 23–35 © 2016 JITTC Palgrave Macmillan All rights reserved 2043-8869/16 palgrave-journals.com/jittc/ JIT085 t Teaching case Jongsawas Chongwatpol NIDA Business School, National Institute of Development Administration, Bangkok, Thailand rP os Data analysis and decision making: a case study of re-accommodating passengers for an airline company op yo Correspondence: J Chongwatpol, NIDA Business School, National Institute of Development Administration, 118 Seri Thai Road, Bangkok, Bangkapi 10240, Thailand. Tel: +0867769686 O No tC Abstract This case is designed to illustrate the conceptual foundations of business intelligence; thus, the analysts can develop an understanding on how to utilize the business intelligence framework to make proper decisions in the turbulent and competitive business environment. The case started when Bob, the senior vice president of Thai ABC Airline, had to implement a new method of re-accommodating passengers in the case of canceled/delayed flights. The first incident was reported that the flight from Bangkok, Thailand (BKK) to Hong Kong (HKG) was expected to be delayed and seven passengers would definitely miss the original connecting flight from Hong Kong to Chicago, USA. Unfortunately, the next available flight to Chicago was almost fully booked and could accommodate only two more passengers. Thus, Bob and his team had to decide which two passengers should be on the next available flight and which others would have to stay overnight in Bangkok for the morning flight to Chicago on the next day. The following topics are discussed in or raised by the case: (1) Airline Industry and the incidence of passengers’ dissatisfaction because of delayed/ canceled flights, (2) Business intelligence concept, (3) Customer acquisition and customer retention, (4) Social media and key influencers, and (5) Decision making based on different airline’s strategic direction. Journal of Information Technology Teaching Cases (2016) 6, 23–35. doi:10.1057/jittc.2015.16 Keywords: business intelligence; analytics; airline; misconnecting; customer lifetime value Do n a busy day in May 2015, Bob, the senior vice president of Thai ABC Airline, was still thinking about the Airline’s problem of poor customer satisfaction rate that he had just spent the better part of the morning discussing with two key members of his team. He had called the meeting to ascertain whether both members had any innovative ideas that the Airline might implement to address the poor customer satisfaction rate that had long afflicted the carrier and the two predecessor airlines whose late-2014 merger had formed it. With approximately 1.5 complaints per 10,000 passengers per year, the Airline had the dubious distinction of having the highest ratio of passenger complaints among all the carriers in SEA. From his earlier investigation of complaints filed by passengers with the Airline’s representatives, Bob already knew before the meeting with his team members that the most common complaint concerned canceled or delayed flights, a chronic ‘legacy’ problem inherited from the two predecessor carriers. Bob understood those issues, none of which were unique to Thai ABC Airline, but believed that if a new method of reaccommodating passengers could be devised in cases of canceled or delayed flights, a couple of short-term advantages would accrue to the Airline. Specifically, the proper handling of passengers when they were about to miss their flight would not only alleviate the situation and minimize passenger complaints, but also retain value passengers for the Airline while maintaining passenger satisfaction levels. Longer term, however, Thai ABC also had plans to tackle the issue of mechanical problems that were known to be the core problem that accounted for a sizable proportion of the reasons for delayed and canceled flights. That is, by investing in the new technologically advanced airplanes that offered both better fuel efficiency and systems maintenance, the Airline planned to reduce substantially the number of canceled and delayed flights that led to passenger complaints in the first place. This document is authorized for educator review use only by Monira Aloud, King Saud University until Nov 2021. Copying or posting is an infringement of copyright. Permissions@hbsp.harvard.edu or 617.783.7860 Data analysis and decision making J Chongwatpol 24 ● ● ● t Inconsiderate and unhelpful customer service, especially in the treatment of delayed passengers. Damaged or delayed baggage. The handling of refunds in the case of missing flights, fare adjustments, and unused or lost tickets. Over-sales – for instance, the overbooking of seats on flights. Examining the list, it occurred to Bob that the design and implementation of a better method of re-accommodating passengers in the case of canceled/delayed flights might enable the Airline to make a big dent in the number one complaint As it happened, a new re-accommodation situation has just arisen and needed to be sorted out on the Bangkok (BKK) to Chicago (ORD) via Hong Kong (HKG) flight, the most problematic international route. This might be, Bob thought, a serendipitous test case in which to further develop his thinking about improvements in the re-accommodation rebooking scheme that he had just thrashed around with Peter and John. Do No tC op yo Overview of Thai ABC airline Thai ABC Airline was the outcome of a merger of two erstwhile competitor carriers, Bangkok ABC Airline and Thai XYZ Airline. Bangkok ABC had been for years the second largest airline in Thailand and the fifth largest airline in Southeast Asia (SEA). Thai XYZ Airline had been in the business for over 20 years before being forced into bankruptcy in late 2012 by its fifth consecutive year of annual losses. The losses were attributable to a combination of poor customer satisfaction ratings and inefficient operations, resulting in not only a reduction in the number of passengers but also substantially increased operating costs. As Thai XYZ’s bankruptcy proceedings had entered 2014, Bangkok ABC perceived a business opportunity in its former competitor’s misfortune and expressed an interest in a possible merger with Thai XYZ. The merger was viewed as particularly attractive, as it would give the consolidated carrier exclusive routes across SEA and the United States. Hence, in mid-2014, Bangkok ABC announced its intention to merge with Thai XYZ; and, after all passengers’ award mileage and elite-qualifying activity were combined in the fourth quarter of the year, the merger was finalized at the end of 2014 and the newly merged entity, ‘Thai ABC Airline,’ took flight. As the merger had moved toward its anticipated consummation, Bob had been hired as the senior vice president of Thai ABC Airline with the explicit mandate to solve the problem of poor customer satisfaction that had afflicted the carrier for years. Indeed, with the imminent consummation of merger with Thai XYZ, this was a matter of top priority because, at 1.5 complaints per 10,000 passengers, Thai XYZ’s own customer complaint ratio was equally dismal, and like Thailand ABC’s, among the highest among the carriers in SEA. Moreover, Bob had been given to understand that the low level of passenger satisfaction indicated by such complaint rates had been one of the two main factors that had tipped Thai XYZ into bankruptcy in the first place. Some way had to be found to avoid having that fate befall the soon-to-emerge new carrier, Thai ABC. Over the course of the next several months, as Bob had begun investigating the complaints that passengers had filed with the airlines’ representatives over the previous 5 years, he had surmised that passenger complaints tended to fall into one of several categories. In descending order of their frequency, the following were the major ones: ● rP os Having just ‘brainstormed’ with his team the issue of how the current passenger re-accommodation method could be greatly improved, Bob was mentally reviewing all that the team had discussed. ‘Conceivably,’ he heard himself exclaim aloud, ‘we just might have surfaced a method of passenger reaccommodation with the potential to both minimize passenger complaints and optimize Airline revenue when delayed or canceled flights do occur!’ He could hardly contain his excitement about the prospect, but nevertheless deemed it wise to continue to ponder the new method before taking a firm decision. ● Canceled or delayed flights – whether attributable to weather (50%) or to mechanical issues (50%). This was by far the most common complaint. The BKK-HG-ORD problem route and the current rebooking scheme The perennial problem route: BKK-HKG-ORD The instant need for rebooking decisions had arisen, as it often did, from a delay in the flight from Bangkok to Hong Kong. This time, there were seven passengers, who would definitely miss the connecting flight from Hong Kong to Chicago, USA. It was the airline’s responsibility to reschedule those passengers either to the next flight later in the day or to a flight on the next day. However, because of the limited seat-availability during the high travel season as the year-end approached, the next flight to Hong Kong that would enable an on-time connection to the flight to Chicago could accommodate only two passengers. The other five passengers would have to stay overnight in Bangkok. To determine how the decision as to which two passengers would be boarded and which would have to be re-scheduled, Bob had wanted to learn, first, how the dilemma would be resolved with current re-accommodating strategies and, then determine whether the analysis of various other factors might facilitate a superior solution for the Airline and the passengers alike. The resulting insights could then be adopted as a ‘best practice’ and be implemented as the Airline’s core strategy for handling misconnected passengers on other routes. With that in mind, earlier that morning, he had urgently called together Peter, formerly business intelligence expert at Bangkok ABC Airline, but now senior business intelligence expert at Thai ABC Airline, and John, formerly manager of the customer relations division at Thai XYZ Airline, for a meeting to discuss flight TB-8880 that was about to miss its schedule because of an engine-related problem. The incident reported from the engineering team was as follows: Flight (TB-8880) from Bangkok, Thailand (BKK) to Hong Kong (HKG) from 01.00 to 04.45 PM was at best expected to be delayed for at least 2 h as one of the engines was overheated and could not be easily fixed. There was a high chance that the fight would be cancelled. This document is authorized for educator review use only by Monira Aloud, King Saud University until Nov 2021. Copying or posting is an infringement of copyright. Permissions@hbsp.harvard.edu or 617.783.7860 Data analysis and decision making J Chongwatpol 25 The next flight operated by Thai ABC Airline to Hong Kong (TB-8882) was scheduled at 03.00–06.45 PM; meanwhile, the flight operated by its alliance [partner] would not leave until 05.00 PM. t op yo It was, therefore, clear to the team that several passengers would definitely miss the connecting flight (TB-676) from Hong Kong to Chicago scheduled at 09:00 PM. The problem was that the flight operated by Thai ABC Airline to Chicago was only scheduled for once a day, and the earliest flight to Chicago with its partner would depart at 09:00 AM on the next day. Bob knew that, from the perspective of passengers, it was quite frustrating when things went wrong. He also knew that the Airline could not afford losing its clients or leaving passengers with disappointment and low expectations again and again. With a furrowed brow, he emphasized to his team that: waiting at the airport lounge for several hours. Meanwhile, Danny had a final destination of Las Vegas, NV, shown in Appendix A. With respect to frequent flyer status, Tom was a 2015 diamond member, the highest status granted to a frequent flyer of the Airline, which was earned when a passenger had reached the 100,000 qualified miles in the previous year. Jennie was a million miler, having flown with the Airline and its partners for over a million qualified miles and, therefore, having automatically received a gold member status, the second highest status with the Airline’s frequent flyer program. Danny had earned gold status when he reached 50,000 qualified miles in 2014. Michael also held gold status, as he was currently participating in the Premier Status Match Challenge program, where he could earn the premier diamond member if he could fly more than 30,000 qualified miles on flights operated by Thai ABC Airline within the next 90 days. Ben, Joe, and Jane were all in the basic traveler category without any elite status. Chiming in at this point, John explained further that the current re-accommodating scheme was based on the booking class and fare, with business/first class ticketed passengers receiving the top priority. rP os In perusing the passengers’ schedule on both direct and connecting itineraries, John noted that: The first task is to reschedule passengers leaving for Chicago to Flight TB-8882 so that they would able to catch the connecting flight in Hong Kong. Otherwise, they will end up staying overnight in Bangkok. The problem unfortunately, is that the Fight TB-8882 is almost fully booked and can accommodate only two more passengers and only in economy cabin. No tC Then, turning to Peter, the senior business analyst, Bob asked him to share with the team his successful experiences at Bangkok ABC Airline in resolving such rebooking dilemmas. After all, Bob pointed out, that after the completion of airline merging processes, the legacy systems of the two companies – including database, operating systems, accounting, reservation systems, and so on. – had been combined, with the business intelligence (BI) framework of Bangkok ABC adopted as the ‘best practice’ and, therefore, as the main system of the new Thai ABC Airline. Hence, the instant re-accommodation problem, he believed, was a good time for the team, including John, to familiarize themselves with Thai ABC’s new approaches to BI technology and re-bookings issues, with the view to ascertaining how satisfactorily it would solve the instant problem and, longer term, improve passenger satisfaction. Do Existing and contemplated rebooking schemes at Thai ABC airline Swinging into action, Peter quickly retrieved data from Thai ABC’s data warehouse to get some sense of each passenger, while John spoke telephonically with Thai ABC’s airline agent at the counter explaining the situation. The only good news at the moment was that check-in had not yet begun, as the Airline counter would not be ready for about another hour. (See Appendix A for the flight, status, and booking information on each passenger that Peter had pulled up from the database.) From Peter’s query of the database, most of the passengers were starting the trip from Bangkok for the final destination of Chicago, with the exception of Jennie, who had been on the connecting flight from Singapore (SIN) and had been already That’s how we [i.e., Thai XYZ Airline] did [it]. It’s quite simple. . . . [T]hey paid for the better service especially in business or first class. Thus, they deserved better care from our side, didnt they? Peter did not argue with John about whether that was a right or wrong approach, but insisted that there were ‘so many factors needed to be considered’ before deciding too quickly. As members of top management, it was very important to gather relevant, complete, and up-to-date data before making any decision, Peter explained. Bob nodded in agreement and asked Peter to pull up the historical data on the number of qualified miles earned so that he could understand the traveling patterns of each passenger. So many factors that needed to be considered Historical data on qualified miles (degree of loyalty and trends) With a few clicks on his keyboard, Peter soon brought forth from the database the last three years of data on each of the seven passenger’s lifetime miles earned with the Airline. As presented in Appendix B: ● ● ● ● Jennie, who had flown over 1,500,000 total miles, had not traveled as frequently as she once did. However, it seemed that she had started traveling again this year; and, so far she had earned a fairly modest amount of miles at 20,000 miles in 2015. Tom was a steady traveler with approximately over 100,000 accrued miles annually for three consecutive years. He also had traveled quite often in 2015, having earned 30,000 thus far. His lifetime miles also placed him among the top travelers. Michael and Ben were definitely new travelers as there were no records of them in the house file. Danny had been with the airline for some time and had seemed to increase his travels gradually since 2012. This document is authorized for educator review use only by Monira Aloud, King Saud University until Nov 2021. Copying or posting is an infringement of copyright. Permissions@hbsp.harvard.edu or 617.783.7860 Data analysis and decision making J Chongwatpol 26 ● op yo While Peter was gathering information and presenting the historical data for each customer, John added that by looking at the Premier Status Match Challenge Program, it could be seen in the application form that Michael was holding the highest elite status with the Airline’s competitors, in that he flew over 100,000 miles annually. He had begun participating in the Challenge Program because he had just moved to Bangkok, the hub of the Thai ABC airline, meaning more flight schedules offered, fewer connecting flights, and somewhat cheaper fares. center when he needed to book multiple cities for an itinerary with a stop-over in each city for a couple of days. The airline did not have much data for Michael and Ben, as they were new customers. Michael booked through the corporate booking channels, and Ben bought her tickets from a travel agency. As the airline loyalty program allowed passengers to redeem their miles for award tickets, Tom and Danny were among those passengers collecting a significant amount of miles from flight, credit card, and shopping portals; thus, they often contacted the loyalty plus award call center to redeem their mileage for mostly business class tickets for flights to almost anywhere around-the-world, using both the Airline and its alliance partners. Owing to the benefit of the award flight redemption and the elite status they were holding, both Tom and Danny often contacted the call center, as they were allowed to change the flight schedule without paying the changing fees. By contrast, Joe changed or canceled the flight tickets from time to time but also paid a significant amount of fees, as he was not holding any elite status with the airline. Peter’s subsequent calculation of the cost to serve each passenger clearly revealed that it was quite costly to serve Jennie, Tom, and Danny, as opposed to Joe and Jane. This was as Bob had surmised from database information concerning the differentials in call center usage. t Joe had only occasionally traveled with the airline in past years. However, his travel pattern had drastically changed in 2014, making him the first traveler among the seven to reach 50,000 qualified miles in 2015. Jane had traveled a bit in 2015. Although she had never reached gold status, her average miles earned, at approximately 40,000 miles annually, were quite significant. rP os ● No tC Profit matrix/scores As a senior vice president, Bob realized that revenue and profit were important factors measuring the performance of the organization in the long run. Therefore, he next asked John to delineate the revenue generated solely from the ticket fares for all flights that each passenger had purchased. Appendix C presents both lifetime and YTD revenues for each passenger. Jennie had the highest lifetime revenue, followed by Tom, Jane, and Danny. This was reasonably in line with the lifetime miles earned as presented in Appendix B. Both profit score and frequency trend score were also calculated based on the ticket fares, number of tickets, and qualified miles earned in the past 3 years. These factors would provide a greater insight into how each customer contributed to the Airline’s financial performance throughout the time they were with the airline. The profit scores indicated that Jane and Michael were the airline’s excellent customers with the highest profit score. The frequency score indicated that Jennie, Joe, and Jane had traveled both more and more recently in comparison to Danny, for whom this was his first flight in 5 months. Tom was quite a steady traveler, but the Airline had no data for Michael and Jane, as they were first-time flyers. Do Cost of operations At this point, Peter reminded Bob that cost of operations related to serving passengers should also be considered in the rebooking schemes as the airline spent a significant amount of money on sales and promotions, passenger services, administration, and infrastructure. John pulled up the record and focused on the booking channel that the passengers had used to reserve their tickets, along with the records from its customer service division. Per the monthly report shown in Appendix D, Jennie had used only the Airline call center to find, book, and retrieve the flight information and tickets – at a high cost to the Airline. Tom mostly used corporate booking channels for his flights for business trips. For personal trips, he used websites to manage his account. Danny, Joe, and Jane were avid new generation travelers with advanced skills in computers and technology. They managed their travel through mobile and web applications, and subscribed to all of the electronic versions of items such as boarding passes, receipts, and monthly statements. Danny sometimes contacted the call More insights into passenger profiles From online accounts and customer services As Peter and John were summarizing the data to enable a prioritization of the passengers for the next available flight, Bob – realizing that for decisions such as this, ‘more is better’ – advanced the view that it would be better to gather more information about each passenger. Fortunately, John could retrieve some information on passenger backgrounds from the online accounts and customer services. Here was the additional information that he added to the already retrieved passenger data. ● ● ● Danny was an avid around-the-world traveler, who owned one of the most famous blogs ‘Travel More with Less’. He continually provided reviews and deals on airlines, restaurants, and hotels on his blog. Ben was a famous singer, who was a first-time flyer as well. Jane was a politician, who was also happened to be against the campaign, ‘Thailand – AEC Tourism Hub,’ that another political party was promoting, as she believed the quality of service providers in Thailand was not yet been ready for such as big project. John believed social media was another important factor to be considered. It was inevitable that the Airline would need to understand how social media or networking influenced passengers’ perceptions, attitudes, and behaviors concerning the Airline’s services and operations. For instance, as presented in Appendix E, Joe and Tom seemed to be the Airline’s most avid followers as they usually bought flight tickets based on deals and promotions posted on social media channels. Danny’s Blog had an affiliated link to the Thai ABC Airline website. When Danny talked about the Airline’s services and promotions in his blog, the number of clicks through the affiliated link increased significantly. Thus, Danny’s blog really played an important role for the Airline and was considered another This document is authorized for educator review use only by Monira Aloud, King Saud University until Nov 2021. Copying or posting is an infringement of copyright. Permissions@hbsp.harvard.edu or 617.783.7860 Data analysis and decision making J Chongwatpol 27 No tC t op yo From social media Peter had foreseen how tough could be the impact of social media on decision making. He proceeded to do a quick visualization from the data warehouse as an example to figure out the behavior of all passengers who were using tweeter. There were many customers who tweeted a lot, but whose opinions did not have a significant impact on their followers. As presented in Appendix F, both Joe and Tom tweeted infrequently and clearly did not have many followers. A celebrity like Ben also did not tweet that much; but, when she did, her followers and her fan club would definitely pick-up on her. The key player here, however, was Danny, who not only blogged a lot on his website and twitter, but also had a lot of followers. When he ‘blogged’ or ‘twittered,’ his followers definitely paid attention to his comments or recommendations. To make the situation even more concerning, John reminded Bob that the biggest problem might emanate from Jane. Although Jane did travel with Thai ABC sometimes, her perception toward the airline might impact its future direction, especially when the airline needed the government’s support to promote Thailand as the hub of tourism in SEA. She had not had a pleasant experience the last time she flew with Thai ABC Airline, based on her complaint to the Airline’s customer service department. She had complained of ‘chaos’ because of overcrowded passenger conditions that had caused about a half an hour delay. In addition, she complained that she found her baggage to be damaged when she arrived at the destination airport. It was not difficult to imagine her reactions when she figured out that her flight would be delayed again. Another headache for Bob, again! The system also calculated the expected revenue based on the search queries to give the airline an idea of the potential revenues gained from each customer, should his or her queries result in the purchase of an actual ticket. As presented in Appendix F, the expected revenue for Tom was US$0 as all queries were for award redemption tickets. In contrast, Joe seemed to be planning a big spending spree for travel in the near future. He was looking to book flights with his five friends or families for trips to Tokyo and Seoul. A recorded total of 50 queries for two possible routes suggested that these were high-potential trips with respect to the revenue that the Airline would gain if they should materialize. That is, although the fares would be for economy class, the expected revenue, based on the flights searched, was estimated at $12,000. In addition, the Airline could see the potential demand from Danny and Jane as well, given their approximately 10–15 search queries, respectively, for excursions that would yield expected revenue of $1250 and $3000, respectively. rP os channel that linked Thai ABC Airline to other customers, both current and potential. On the other hand, Ben was quite in another extreme. Her opinion on Social Media sites potentially drew big attention because she was so popular among the younger generation. With her lifestyle and personality, she usually tweeted only about bad experiences she had recently faced during her last trip or event, promoting the spread of misinformation or biased opinions to her followers. Bob could only imagine what the situation would look like when Ben found out that she could miss the flights to Chicago. Regardless of whether her trip was for business or a personal vacation, Bob would have a hard time to dealing with the negative feedback, especially from her fan club. A potentially big headache for Bob, actually! Do From mobile/web application data After the merger of the two airlines, the recently implemented web and mobile applications had allowed the airline to track all passengers’ activities, starting from when they logged into their accounts within the last 6 months. Any queries posed by passengers as they searched through the sites were recorded, as were any changes in passengers’ preferences, such as favorite locations, seat selection, or meals. (Appendix G contains Peter’s demonstration of this new feature.) For instance, captured data indicated that Tom was interested in redeeming miles for a business class ticket to Europe for his own personal use, as he had searched award flights 15 times in the past 6 months The routes he searched were for three of his favorite cities in Western Europe, that is, Prague, Budapest, and Bratislava. Passenger-centric display At this point, Peter, believing that the team had culled about as much information on the seven passengers as the databases contained, introduced his idea about how to develop a business intelligence ‘dashboard’ to aid in this genre of decision making. Developed when he worked as a senior business intelligence expert at Bangkok ABC Airline, the business intelligence dashboard was just a graphical interface that displayed the current status of information about or factors needed concerning a specific goal or goals. As an example, he quickly developed a passenger-centric display (see Appendix H) that consolidated all relevant data specific to Tom, and displayed the metrics needed for a specific decision making purpose into a single frame. These metrics included Tom’s current and future flight information, past incident reports, profit score, frequency trend, or cost to serve indicators. This passenger-centric display was customized, with the ability to pull real-time data from multiple data sources together in order to indicate the status of each passenger at a specific point in time. For instance, the display indicated that the previous flight that Tom had flown with the airline experienced a 50 min delay on 2 February 2015, and also that he had not been satisfied with the services, as his baggage had been lost on his October 2014 flight. As John played with the newly developed interface and had a quick glance at each passenger on the display, he could see the benefit of having such an interface because it greatly facilitated ready access to needed information and in a short period of time. He could inform Bob that, for instance, Michael and Danny were based in the United States and that approximately 80% of the trips for Danny were flights from Bangkok to major cities in the United States. For his part, Bob fully agreed with Peter that the interface was complete, customizable, and easy to use, especially in gathering all the information he really needed to justify his decision. Thai ABC airline policy Thai ABC Airline was committed to providing an exceptional travel experience for all customers. The Airline constantly strived very hard to enhance its service delivery and improve its current systems and policies with customers in mind. In addition, the Airline always took into account profound This document is authorized for educator review use only by Monira Aloud, King Saud University until Nov 2021. Copying or posting is an infringement of copyright. Permissions@hbsp.harvard.edu or 617.783.7860 Data analysis and decision making J Chongwatpol 28 rP os t Bob mentioned that this year the Airline’s board of directors had decided to budget approximately $10M dedicated for TV and Internet advertisement, and promotional campaigns, especially for the elite members, not only to reward and increase satisfaction of its customers, but also to compete with its competitors. It had been estimated that with the current campaign, the number of lost customers (also called, ‘customer attrition rate’) could be reduced from 20 to 19%. Similarly, Bob was also thinking about setting up a budget of about the same amount as allocated to its credit card partners to attract those customers, who had not yet flown with Thai ABC Airline but had great potential as these customers always aimed to collect mileage either through actually flying with the Airlines or from credit card spending. The ultimate goal was to gain the option to redeem those collected miles to travel around without having to pay more to purchase tickets. John estimated that the average cost to persuade these new customers would be around $750 per person. John also reminded Bob that the airline core business routing was that of SEA/Europe. From the approximately 400,000 customers, both active and non-active members, in the database, John could see a trend of gradually decreasing flights to Europe and significantly increased demand for flights to the United States in the past 8 months. He believed it was a good time for the airline to expand its routes to the United States. Currently, Thai ABC Airline was ranked fifth in market share of the Asia/US routings, following Singapore Airline, Cathay Pacific, Japan Airline, and ANA airline. Another point to consider was the effects of social media on the airline industry. Currently, Thai ABC Airline used the Do No tC op yo differences in the value of various customers and segments not only to appropriately allocate sale forces and other resources and best serve the right customers, but also provide the greatest value in return to the enterprise. In fact, over the years, the Airline had instituted some major changes in flights award bookings. Also planned for implementation in the next few years was a switch to a revenue-based mileage-earned formula, meaning that passengers would earn qualified miles based on how much money passengers spend per flight rather than the distance of the flights they actually flew. Returning to the BKK-HKG-ORD rebooking problem, Bob and his team had determined that there were a number of factors that had to be taken into account when arriving at the value that the Airline placed on its passengers, including actual ticket price, fare class, purchased ticket routing, and elite status. Further, any changes to the airline policy usually resulted in a decrease in the number of customers or customer satisfaction. For example, as Bob looked at the historical data, he could see that each year the Airline lost approximately 20% of its customers, especially when customers perceived negatively the policy changes that were made, for example, the devaluation of an award chart or a higher bar imposed for earning qualified mileage. However, he also realized that those customers who stayed with the airline usually increased the revenues by approximately 5%. The average revenue earned for all passengers (both active and inactive) was estimated at $500 per year. Considering the discount rate of 10% annually, Bob decided to calculate the average customer lifetime value (CLV) for all passengers as a reference point (see Figure 1). Currently, the average CLV was estimated at $2000 per passenger. Figure 1 Customer lifetime value. This document is authorized for educator review use only by Monira Aloud, King Saud University until Nov 2021. Copying or posting is an infringement of copyright. Permissions@hbsp.harvard.edu or 617.783.7860 Data analysis and decision making J Chongwatpol 29 rP os t 3. Calculate the CLV for each customer assuming: the discount rate is 10%; the chance that losing customers to the competitors is 20% annually; and, a 5% chance that each customer increases the business if a passenger decides to stay with the airline. 4. Discuss the importance of customer acquisition and customer retention. 5. Discuss which two passengers should be on the Flight TB8882, and which five would stay overnight in Bangkok. Note The condensed data used in this case was acquired largely through secondary resources. The case extends the original work of Dave Schrader (2012) ‘BSI: The Case of the Misconnecting Passengers,’ in which the author focuses on enhancing the rebooking processes and improving customer satisfaction at Air London, by integrating data and analytics to enable smarter decision making by operations and gate agent personnel. Schrader provides a 7.45 –min video to present the story, which is published as a part of Business Scenario Investigations series at the Terada University Network in the United States. op yo social media and online channels to establish personal relationships with its customers and leverage social pressure affecting purchasing decisions. It was one of John’s important tasks to respond to any unforeseen changes or the spread of negative customer reviews in its social media channels such as Facebook and Twitter, or blogs such as tripadvisor.com or flyertalks.com. In the past several years, John had observed many enterprises collapse because of not having a proper social media policy in place or underestimating the impact of social media; and, the airline was trying to avoid any surprises from its followers. In the case of a delayed or canceled flight, the Airline had clearly established policies to compensate its customers fairly based on the ticket class, ticket price, elite status, and other specific circumstances. Although it was quite costly to the enterprise, the airline had good relationships with the hotels nearby the airport and with other alliance partners to accommodate passengers for overnight stays when necessary and for re-scheduling on partner flights when needed. High ‘value’ customers received $400–$1600 for delayed or canceled flights; others might receive 5000–20,000 in extra bonus miles that were enough for redeeming award flights in the future; and, still others might get upgraded to the next available class of service. Hence, Bob was much less worried about the compensation that would have to be effectuated because of delay than he was about how best to handle the situation. Acknowledgements No tC Time to lock in the final choices On the basis of what Bob had learned in the meeting with his team, he knew that although the Airline always endeavored to bring passengers to their final destination as scheduled, it was inevitable that there would be times when flights were delayed or canceled because of weather conditions and operational or service issues. Hence, this was a great opportunity for him to revisit Thai ABC’s current rebooking/re-accommodating methods to ascertain whether incorporation of the additional factors that that the team had discussed would facilitate superior decisions for both the passengers and the Airline. Given the departure delay confronting Flight TB-8882 on the BKK-HKG-ORD route, Bob now needed to decide, without further delay, which two passengers should be on the Flight TB-8882 and which five would, therefore, have to stay overnight in Bangkok. Discussion questions Do 1. Please list all relevant factors that should be included in the rebooking or re-accommodating schemes. 2. Please construct the business intelligence architecture for the rebooking decision. Identify the components and their interrelated function. The author would like to thank Professor Dr. Clifford E. Darden, advisor to the NIDA Business School, for his thoughtful and thorough feedback and comments on earlier drafts of the case. Reference Schrader, D. (2012). BSI: The Case of the Misconnecting Passengers. [WWW document] http://www.teradatauniversitynetwork.com (accessed 15 June 2015). About the author Jongsawas Chongwatpol is a lecturer in NIDA Business School at National Institute of Development Administration. He received his BE in industrial engineering from Thammasat University, Bangkok, Thailand, and two MS degrees (in risk control management and management technology) from University of Wisconsin – Stout, and Ph.D. in management science and information systems from Oklahoma State University. His research has recently been published in major journals such as Decision Support Systems, Decision Sciences, European Journal of Operational Research, Energy, Industrial Management and Data Systems, and Journal of Business Ethics. His major research interests include decision support systems, RFID, manufacturing management, data mining, and supply chain management. This document is authorized for educator review use only by Monira Aloud, King Saud University until Nov 2021. Copying or posting is an infringement of copyright. Permissions@hbsp.harvard.edu or 617.783.7860 Data analysis and decision making J Chongwatpol 30 Table A1 Flight, Status, and Booking Information (Tier #1) 1 2 3 4 5 6 7 a Name Jennie Tom Michael Danny Ben Joe Jane Routing Status SIN-BKK-HKG-ORD BKK-HKG-ORD BKK-HKG-ORD BKK-HKG-ORD-LAS BKK-HKG-ORD BKK-HKG-ORD BKK-HKG-ORD Premier Status Match Challenge program. Appendix B BKK-HKG-ORD Million Miler, Gold Diamond Golda Gold Regular Regular Regular Booking class Booking fare Economy Business/First Business/First Business/first Economy Economy Business/first Promotional Price Award Booking Full Fare Award Booking Full fare Promotional Price Promotional price op yo No. rP os t Appendix A Fare $750 $0 $5500 $0 $2900 $800 $3500 Table B1 Historical data on the Qualified Miles (Tier #2) 1 2 3 4 5 6 7 b Jennie Tom Michael Danny Ben Joe Jane Routing Status SIN-BKK-HKG-ORD BKK-HKG-ORD BKK-HKG-ORD BKK-HKG-ORD-LAS BKK-HKG-ORD BKK-HKG-ORD BKK-HKG-ORD Million Miler, Gold Diamond Golda Gold Regular Regular Regular Qualified miles 2012 2013 2014 YTD-2015b Lifetime 25,000 123,000 — 30,000 — 2500 40,000 12,000 109,000 — 35,000 — 10,500 39,500 9000 110,000 — 51,000 — 45,000 41,000 20,000 30,000 — — — 50,000 25,000 1,530,000 550,000 — 230,000 — 120,000 160,000 Premier Status Match Challenge program. As of May 2015. No a Name tC No. Appendix C Table C1 Revenue, Profit Score, and Frequency Trend (Tier #3) Name Do No. 1 2 3 4 5 6 7 Jennie Tom Michael Danny Ben Joe Jane Mile Revenue Lifetime Lifetime YTD Time as loyalty (Years) 1,530,000 550,000 — 230,000 — 120,000 160,000 $198,000 $130,000 $5500 $55,000 $2900 $15,000 $60,000 $2500 $7090 $0 $0 $0 $6250 $9500 20 5 1 7 1 4 4 Fare Profit score Frequency trend $750 $0 $5500 $0 $2900 $800 $3500 Low Medium High Medium Medium Low High Up Same — Down — Up Up This document is authorized for educator review use only by Monira Aloud, King Saud University until Nov 2021. Copying or posting is an infringement of copyright. Permissions@hbsp.harvard.edu or 617.783.7860 Do Jennie Tom Michael Danny Ben Joe Jane 1 2 3 4 5 6 7 No. Name Web/mobile app Corporate booking Travel agency With fees Without fees Frequency of changing or canceled flights Frequency of flying with alliance partners (award ticket) - High - High High Cost to serve t V. Low V. Low rP os op yo Loyalty plus award call center tC The airline call center No Booking channels Table D1 Booking Channel and Cost to Serve (Tier #4) Appendix D Data analysis and decision making J Chongwatpol 31 This document is authorized for educator review use only by Monira Aloud, King Saud University until Nov 2021. Copying or posting is an infringement of copyright. Permissions@hbsp.harvard.edu or 617.783.7860 Data analysis and decision making J Chongwatpol 32 Social Media Thai ABC Airline (Facebook and Twitter) Joe and Tom usually bought the fight tickets based on the deals/promotions posted in the social media. No Data (Jennie, Michael, and Jane) The airline did not have sufficient information whether Jennie, Michael, and Jane actually followed the airline’s social media site. Ben used social media to communicate with her fan clubs about her schedule and events. However, she also used this channel to complain about any incidents happening during her trip, such as bad service at a hotel or delayed flight as in this case study. Danny’s Blog “Travel More with Less” As a blogger, Dan significantly provided reviews on deals, promotions, locations, hotels, and airlines he’d recently experienced and or visited. He established the website “www.travelmorewithless.com” in 2002, followed by Facebook and Twitter in the late 2008. Do No tC Figure E1 The impact of social media (tier #5). Ben’s Facebook and Twitter op yo Good Followers (Joe and Tom) rP os t Appendix E This document is authorized for educator review use only by Monira Aloud, King Saud University until Nov 2021. Copying or posting is an infringement of copyright. Permissions@hbsp.harvard.edu or 617.783.7860 Data analysis and decision making J Chongwatpol 33 Do No tC Figure F1 Passengers’ behavior on social media. op yo rP os t Appendix F This document is authorized for educator review use only by Monira Aloud, King Saud University until Nov 2021. Copying or posting is an infringement of copyright. Permissions@hbsp.harvard.edu or 617.783.7860 Data analysis and decision making J Chongwatpol 34 Do No tC op yo rP os t Appendix G Figure G1 Potential trips from call center, mobile applications, and web search queries. This document is authorized for educator review use only by Monira Aloud, King Saud University until Nov 2021. Copying or posting is an infringement of copyright. Permissions@hbsp.harvard.edu or 617.783.7860 Data analysis and decision making J Chongwatpol 35 tC op yo rP os t Appendix H Do No Figure H1 Passenger-centric display (Tom). This document is authorized for educator review use only by Monira Aloud, King Saud University until Nov 2021. Copying or posting is an infringement of copyright. Permissions@hbsp.harvard.edu or 617.783.7860 [BUS 561 - Management Information System] [2021] Management Information System (BUS 561) 2nd Semester of 2021 Case Study Presentation and Report Hand-in date and time • • Presentation due date as scheduled on the course syllabus. Case study report submission on week 11. Notes • • • • • • • This course project contributes to 30% of the overall course assessment. The project should carry out by groups of (2-3) students. You should decide on your team by the end of the first class and submit them to the instructor. Each team member should plan to spend 20 hours total on the project, including some time in class. The electronic document in PDF format is required for submission. This is because PDF documents are platformindependent and accordingly can be viewed and printed by a diversity of operating systems and printers. It would help if you used the Blackboard discussion board as the main place to ask questions you have about the course assignment and project. However, please feel free to make full use of my office hours at the university. However, if you have a question, someone else may have a similar one, and every student will possibly benefit from the answers being available on the course Blackboard system. Besides, please make an effort to answer your classmates’ questions. In grading your participation in the course project, I will include your contributions to the discussion board. Nevertheless, you will not be penalized for wrong answers/clarifications during your participation on the discussion board (or even in class). It would be best to use online collaboration tools to practice group communications to carry out the project. The following penalties will be applied to a project that is submitted after the deadline for submission: − Where the assignment/project is submitted up to one day after the original deadline, 20% of the total marks will be removed from the final mark; − Where the assignment/project is submitted more than two days after the original deadline, a mark of zero will be recorded. The required identifying information on the cover page (e.g., your name and id, course code and title, and the title of the project, class section, and the contact information) should show on the submitted document: − Case study title. − Team members (e.g., Monira Aloud (id:44444444)). − Course code and title (e.g., BUS 561: Management Information Systems). − Class section (e.g., 45685). − Contact information (e.g., mealoud@ksu.edu.sa ). − Submission date (e.g., April 13, 2021). 1|Page [BUS 561 - Management Information System] [2021] Learning Outcomes This course project aims to acquire hands-on experience in Management Information Systems (MIS) for organizations and businesses. At the end of the project, you will have: • • Analyze current issues in MIS and its impact on organizational growth. Evaluate the implementation effectiveness and efficiency of MIS applications and processes to improve business functions. Introduction This course project follows the Harvard Business School case-based teaching method. It thus depends on cases, which are used to demonstrate particular aspects of different topics to be studied. Your task is in two folds: presents the case study to your classmates and answer specific questions regarding these cases through writing a report. The case-based teaching method is a student-driven; thus, the instructor mainly has a guiding role in delivering the case study's analytical tasks. Most cases are either analytical or decision cases (or combinations of the two types). Analytical cases offer descriptions of successes, or failures executives have had. As a result, students can improve their skills in identifying relationships between system features and outcomes. Decision cases present the fundamental question: What must be done? Similar in the real world. Nevertheless, the decision-related information presented in these cases is inadequate and partially inaccurate. The utilization of the case teaching method is a crucial design element of this course. During the class, the time must reflect directly into real-world activity: how to analyze, decide, and act. A verity of business schools has established that the best way to teach these skills is by the case-based approach. Cases are a handy tool in education because they promote learning through the analysis of real events. They challenge students by offering them real-life business situations and placing them in the positions of organizational decision-makers. Business cases provide three different roles. First, they help students build analytical skills in a world where businesses and technologies are continuously changing. Second, business case discussions support students to build soft skills. Management is a social art; thus, it involves working with and through others. Third, and possibly most important, discussing different business cases leads to various ways of thinking—and acting. The case-based approach places the student in the practice of making decisions. Project structure The project will start with an opening meeting (first week) that introduces the project content and the evaluation criteria. The project requirement is divided into two main deliverables: • Case study presentation (10 points). • Case study report (20 points). 2|Page [BUS 561 - Management Information System] [2021] Technicalities and Deliverables Below are some points that clarify the requirements and provides some guidelines: • Choose one of the case studies available in the KSU LMS and fill out the Google sheet. The instructor will avoid overlapping selections; first come first serve. • Before the presentation day, send the presentation as PDF to the instructor via Blackboard. • You will have 40 minutes to present the case to the class and 10 minutes for questions and answers. The time limit is firmly required. For effective communication, you may prepare PowerPoint slides to support your presentation. • You should have a minimum of one breakout session (last for 5-7 minutes). Therefore, you should prepare a set of questions to be discussed by a group of students during the breakout session. • Plan how you will conduct the discussion. You should pose an opening question and give your classmates a few minutes to participate. Allow your classmates to ask questions or share their viewpoints in class. • There will be one presentation per class, starting from week 3. • The presentation PowerPoint file should not exceed 30 slides. • If you are citing a source or quoting other works, be sure to reference your source using the APA style. • Case report number of pages: maximum 10 pages, appendices and list of references not included. • Case report content: an overview of the case study, analysis of problems and presentation of solutions. You should support your analysis with facts and evidence from the case. Most cases will not include all the data and facts that you might like to have. If needed, make assumptions, and explain them. You are also required to explore relevant (theoretical or empirical) literature that can be applied to support the case analysis. • Style: Typed; layout and structure according to academic standards (page margin normal, font size 11, line spacing 1.5 lines). Team presentations During this semester, all students will have to participate in one team presentation of the selected business case. The presentation should take about 40 minutes (includes time for class and breakout room discussion). The presenting team will provide a summarization of the case study followed by their viewpoints and recommendations to the case study, while at the same time making sure that their classmates join and interact with the case discussion. 3|Page [BUS 561 - Management Information System] [2021] Writing a case study analysis: Part I - Preparing the Case • • • • Read and analyze the case study thoroughly. Take notes, highlight relevant facts and information, highlight key problems and solutions. Focus your analysis. Identify two to five key problems? Why do they exist? How do they impact the organization? Who is responsible for them? Uncover possible solutions: review course readings, discussions, theoretical and empirical literature; your experience. Select the best solution. Part II- Wiring the Case Report For writing the case report, you do not need to repeat all the case information and facts to make your viewpoints and recommendation. Instead, be brief in illustrating these facts and focus on describing your point of view. For your recommendation and conclusions, write persuasively giving reasons and facts, not just personal impressions. You should provide evidence to support your statements. You must avoid overgeneralizations (e.g., all, always, everyone, nothing, never, none, just, most). Therefore, choose terms that most accurately describe the number, extent, and frequency of the asserting facts. Once you have gathered the required information, a draft of your case analysis has to include these general sections. Still, these may vary depending on your analysis directions or your specific case study: • • • • • Introduction − Identify the key problems and issues in the case study. − Prepare a case statement where you should summarize the outcome of your analysis in 2-3 sentences. Background − Provide background information, relevant facts, and the most critical problems/issues. Evaluation of the Case − Outline the different parts of the case study that you are focusing on. − Evaluate these parts by discussing what is working and what is not working. You are also required to explore relevant (theoretical or empirical) literature that can be applied to support the case analysis. − State why these parts of the case study are or are not working well. Proposed Solution/Changes − Provide specific and practical solution(s) or changes needed. − Explain why this solution was chosen. − Support this solution with strong evidence, such as theories and concepts from class (text readings, discussions, lectures), scientific research, personal experience. Recommendations − Define and discuss specific strategies for accomplishing the proposed solution. − If applicable, recommend further action to resolve some of the issues. − What should be done, and who should do it? 4|Page [BUS 561 - Management Information System] [2021] • • • Conclusion Reference Appendix (if applicable) Case Studies Week Case Study 3 Data Analysis and Decision Making: A Case Study of Re-accommodating Passengers for an Airline 4 Giving Data A Voice: The Rise of TalkingData 6 Alfie: Working Out a Virtual Fitness Concierge Platform 7 Driving Digital Transformation at the DBS Bank 8 Samsung: The Internet of Things 9 DBS: From the "World's Best Bank" to Building the Future-ready Enterprise 10 Information Systems Acquisition Decisions: Learning Management System of SolBridge 11 PropertyGuru: Driving AI Powered Real Estate 12 Coda Coffee and bext360 Supply Chain: Machine Vision, AI, IoT, and Blockchain 13 Uber (B) - Uber in Every Major City in the World: The Globalization Challenge 5|Page BUS 561: Management Information System Assignment & Project Evaluation Rubric BUS 561: Management Information System Student Name: Student ID: Student Name: Student ID: Comments from the faculty member: _____________________________________________________________________________________________________________________________ _____________________________________________________________________________________________________________________________ _____________________________________________________________________________________________________________________________ _____________________________________________________________________________________________________________________________ _______________________________________________________________________________________________________ ______________________ Signature of the faculty Member Monira Aloud Page 1 BUS 561: Management Information System Case Study Grading Rubric – BUS 561 @ MBA Percentage Scale: Scaled Score: % Clear explanation of key strategic issues 20% • The problems, scope, and seriousness was clearly identified in the discussions. • There was a well focused diagnosis of strategic issues and key problems that demonstrated a good grasp of the company’s present situation and strategic issues. • Effective Executive Summary • Did not waste space summarizing information already found in the case. 0.00 – 57.49% 0.0 – 0.6 Below Standard Shows little understanding of the issues, key problems, and the company’s present situation and strategic issues. 57.50 – 76.24% 0.7 – 2.1 Approaching Standard Shows some understanding of the issues, key problems, and the company’s present situation and strategic issues. 76.25 - 93.74% 2.2 - 3.5 At Standard Shows adequate knowledge of the issues, key problems, and the company’s present situation and strategic issues. 93.75 - 100% 3.6 - 4.0 Exceeds Standard Shows superior knowledge of the issues, key problems, and the company’s present situation and strategic issues. Executive summary missing or poorly constructed Executive summary inadequate Executive summary adequate Effective Executive Summary Valid arguments; analysis of financial performance with relevant supportive detail  Logically organized, key points, key arguments, and important criteria for evaluating business strategies were easily identified  Critical issues and key problems that supported the Case Analysis were identified and clearly analyzed and supported. Appropriate analysis, evaluation, synthesis for the specific industry identified  There was complete data on which to base a thorough analysis  Key change drivers underlying the issues were identified.  Synthesis, analysis, and evaluations were clearly presented and supported in a literate and effective manner. Conclusions and recommendations are congruent with strategic analysis  Specific recommendations and/or plans of action provided.  Specific data or facts were referred to when necessary to support the analysis and conclusions.  Recommendations and conclusions were presented and supported in a literate and effective manner. 20% Critical issues and key problems that supported the Case Analysis were poorly identified, analyzed, and supported. Critical issues and key problems that supported the Case Analysis were not clearly identified, analyzed, and supported. Critical issues and key problems that supported the Case Analysis were partially identified, analyzed, and supported. Critical issues and key problems that supported the Case Analysis were clearly identified, analyzed, and supported. 20% Analysis of key change drivers and the underlying the issues inadequate. Analysis of key change drivers and the underlying the issues were not identified. Analysis of key change drivers and the underlying the issues were partially identified Analysis of key change drivers and the underlying the issues were clearly identified 20% Effective recommendations and/or plans of action not provided. Effective recommendations and/or plans of action inadequate. Effective recommendations and/or plans of action were partially provided. Effective recommendations, solutions, and/or plans of action were provided. Specific data or facts necessary to support the analysis and conclusions was not provided. Specific data or facts were not referred when necessary to support the analysis and conclusions. Specific data or facts were occasionally referred when necessary to support the analysis and conclusions. Specific data or facts were referred when necessary to support the analysis and conclusions. Monira Aloud Page 2 BUS 561: Management Information System Proper organization, professional writing, and logical flow of analysis. APA formatting  Logically organized, key points, key arguments, and important criteria for evaluating the business logic easily identified.  Key points were supported with a well thought out rationale based on applying specific concepts or analytical frameworks to the data provided in the case.  Proper grammar, spelling, punctuation, 3rd person objective view, professional writing, and syntax. Monira Aloud 20% Key points were poorly identified and supported with a well thought out rationale based on applying specific concepts or analytical frameworks to the data provided in the case. Key points were not identified and supported with a well thought out rationale based on applying specific concepts or analytical frameworks to the data provided in the case. Key points were partially identified and supported with a well thought out rationale based on applying specific concepts or analytical frameworks to the data provided in the case. Key points were clearly identified and supported with a well thought out rationale based on applying specific concepts or analytical frameworks to the data provided in the case. Grammar, spelling, punctuation, professional writing, and syntax needs significant improvement Grammar, spelling, punctuation, professional writing, and syntax needs improvement Adequate grammar, spelling, punctuation, professional writing, and syntax Excellent grammar, spelling, punctuation, professional writing, and syntax Page 3 Chapter 2 Fund Accounting TRUE/FALSE (CHAPTER 2) 1. Fund accounting promotes control and accountability over restricted resources. True 2. The basis of accounting determines when transactions and events are recognized. True 3. If an entity adopts a full accrual basis of accounting, its measurement focus will automatically be on all economic resources. True 4. A government may report some of its funds on a full accrual basis. True 5. Funds divide a government into functional departments. False 6. General funds are established to account for resources legally restricted for specified purposes. False 7. Fiduciary activities only benefit parties other than the government itself. True 8. The Financial Accounting Standards Board requires all nongovernmental not-for-profit entities to use fund accounting. False 9. In addition to preparing fund financial statements, governments should also prepare consolidated financial statements to provide information on the financial position and operating results of the government as a single economic entity. True 10. Fiduciary activities should be reported in fund statements, but should be excluded from the government-wide statements. True 11. At first glance, the government-wide statement of activities bears little resemblance to the income statement of a business. True 12. In accounting for costs incurred on a major construction project in a capital projects fund, the construction outlays are reported as expenditures, not capital assets. True Granof Test Bank Chapter 2 Page 1 MULTIPLE CHOICE (CHAPTER 2) 1. What is the primary reason that governmental entities use fund accounting? a) Fund accounting is required by law. b) Fund accounting is required by GAAP. c) Fund accounting promotes control and accountability over restricted resources. d) Fund accounting promotes better control over operating activities. 2. Basis of accounting determines which of the following? a) When transactions and events are recognized. b) What transactions and events will be reported. c) Where transactions and events will be reported. d) Why transactions and events will be reported. 3. A fund is a) A separate legal entity. b) A separate fiscal and accounting entity. c) A separate self-balancing set of accounts for inventory purposes. d) None of the above. 4. Which of the following funds is a fiduciary fund? a) Permanent fund. b) Agency fund. c) Capital projects fund. d) Debt service fund. 5. When a governmental entity adopts a basis of accounting other than full accrual and a measurement focus that excludes long-lived assets and liabilities in its governmental fund types: a) It is in violation of the law. b) It is in violation of GAAP. c) It has reported in accordance with GAAP for governmental fund financial statements. d) It has the ability to better measure the results of operations. 6. A city receives a donation from a citizen who specifies that the principal must be invested and the earnings must be used to support operations of a city-owned recreational facility. The principal of this gift should be accounted for in which of the following funds? a) Trust fund. b) Special revenue fund. c) Permanent fund. d) Internal service fund. Granof Test Bank Chapter 2 Page 2 7. Which of the following is NOT a governmental fund? a) City hall debt service fund. b) City utilities enterprise fund. c) Gasoline tax special revenue fund. d) City hall capital projects fund. 8. Which of the following accounts would you least expect to see in a debt service fund? a) Principal payments. b) Interest charges. c) Interest earned. d) Outstanding balance of the debt being serviced. 9. Which of the following funds is a proprietary fund? a) Internal service fund. b) Special revenue fund. c) Capital projects fund. d) Permanent fund. 10. Which of the following funds is a governmental fund? a) Enterprise fund. b) Debt service fund. c) Internal service fund. d) Agency fund. 11. Which of the following activities conducted by a city-owned junior college should be accounted for in an agency fund? a) Receipt of tuition payments. b) Receipt of revenues belonging to the student accounting club. c) Receipt of state monies appropriated for general operations. d) Receipt of donations in support of the university’s athletic program. 12. Which of the following transactions should the City of Highland account for in a trust fund? a) General fund contributions received by the city pension plan. b) Greens fees received from golfers at the city-owned golf course. c) Grants received from the Federal government to purchase buses to be used for public transit. d) Proceeds of bonds issued to construct a new city hall building. 13. The state collects a gasoline tax that must be used to support highway construction and maintenance. The gasoline tax revenue should be accounted for in which of the following funds? a) General fund. b) Special revenue fund. c) Debt service fund. d) Internal service fund. Granof Test Bank Chapter 2 Page 3 14. The City of San Jose built a new city hall and financed construction by issuing bonds due in installments over the next 30 years. The bond principal and interest will be paid by a special tax levied on property in the city. The revenue received from this special tax should be accounted for in which of the following funds? a) General fund. b) Internal service fund. c) Capital projects fund. d) Debt service fund. 15. Riverside Golf Course is a city-owned golf course that collects greens fees in amounts sufficient to cover its expenses. Riverside Golf Course should be accounted for in which of the following funds? a) Internal service fund. b) Enterprise fund. c) General fund. d) Special revenue fund. 16. To fulfill the printing needs of its various departments and agencies, the City has established a Central Print Shop, which bills the various departments and agencies of the city for printing services rendered. The Central Print Shop should be accounted for in which of the following funds. a) Internal service fund. b) Enterprise fund. c) General fund. d) Special revenue fund. 17. Which of the following sections is NOT required in the comprehensive annual financial report of a city? a) Financial section. b) Introductory section. c) Statistical section. d) Historical section. 18. The basic financial statements of a city do NOT include which of the following? a) Government-wide statement of net position. b) Government-wide statement of activities. c) Government-wide statement of cash flows. d) Separate balance sheets for governmental and proprietary funds. 19. Which of the following funds is accounted for on the modified accrual basis of accounting? a) General fund. b) Internal service fund. c) Proprietary fund. d) Pension trust fund. 20. Which of the following assets would NOT be found in the general fund balance sheet of the City of Harrison? a) Cash. b) Capital assets. c) Due from special revenue fund. d) Due from state government. Granof Test Bank Chapter 2 Page 4 21. Which of the following liabilities would NOT be found in the general fund balance sheet of the City of Marmaduke? a) Accounts payable. b) Due to special revenue fund. c) Deferred revenue. d) Bonds payable, due in 5 years. 22. For which of the following entities is fund accounting mandated for financial reporting? a) American Hospital Association. b) City of New York. c) Grace Lutheran Church. d) United Way. 23. The focus of the government-wide statement of activities of the City of West Hills is on which of the following? a) Determining the total expenses by natural classification. b) Determining the total expenses by function. c) Determining the total revenues by function. d) Determining the net cost of functions. 24. Which of the following statements is NOT required in the financial reports of a not-for-profit entity? a) Statement of net position. b) Statement of restricted funds. c) Statement of activities. d) Statement of cash flows. 25. The primary focus of the statement of activities of a not-for-profit organization is on determining the net increase/decrease in which of the following? a) Unrestricted net assets. b) Temporarily restricted net assets. c) Permanent net assets. d) Net assets of the entity taken as a whole. 26. Under the GASB Statement No. 34 reporting model, which of the following is required? a) Only one set of financial statements, prepared on the full accrual basis of accounting. b) Only one set of financial statements, prepared on the modified accrual basis of accounting. c) Two sets of financial statements. One set views the government as a collection of separate funds and uses the current financial resources measurement focus and modified accrual basis of accounting for governmental funds. The other set views the government as a whole by combining all governmental activities in one column and all business-type activities in another column and uses the full accrual basis of accounting for both columns. d) Two sets of financial statements. One set views the government as a whole and uses the current financial resources measurement focus and modified accrual basis of accounting. The other set views the government by function, combines all governmental activities in one column and all business-type activities in another column, and uses the full accrual basis of accounting for both columns. Granof Test Bank Chapter 2 Page 5 27. Under the GASB Statement No. 34 reporting model (as amended by GASB Statement No. 63), the government-wide statement of net position will display which of the following? a) Assets, liabilities, and net position. b) Assets, liabilities, and fund balances. c) Assets, liabilities, and fund equity. d) Assets, liabilities, and owners' equity. 28. Under the GASB Statement No. 34 reporting model, the focus of the government-wide statement of activities is on which of the following? a) Program revenues and general revenues. b) Program revenues and expenses. c) Net income. d) The net cost of each of the government’s main functions and programs. 29. A not-for-profit entity's statement of net assets will NOT report which of the following? a) Net assets invested in capital assets, net of related debt. b) Capital assets. c) Temporarily restricted net assets. d) Permanently restricted net assets. 30. Which of the following funds of Chessie City would be consolidated to form the governmental activities column in the city’s government-wide financial statements? a) General fund, special revenue fund, and agency fund. b) General fund, debt service fund, and capital projects fund. c) General fund, enterprise fund, and fiduciary fund. d) Enterprise fund and internal service fund. 31. Which fund type would all governments normally include in their fund financial statements? a) Capital projects funds b) Special revenue funds c) General fund d) Fiduciary funds 32. Under the GASB Statement No. 34 reporting model, fund financial statements include separate sets of financial statements for: a) Each major function of the government. b) Governmental funds, proprietary funds, and fiduciary funds. c) Governmental funds, enterprise funds, and internal service funds. d) Governmental funds, special revenue funds, and debt service funds. Granof Test Bank Chapter 2 Page 6 33. When a fax machine purchased by a governmental entity is received, it should be recorded in the general fund as a(n) a) Expense b) Encumbrance c) Expenditure d) Capital asset 34. Which of the following is NOT included in the financial section of a comprehensive annual financial report? a) Required supplementary information b) Letter of transmittal c) Financial statements d) Notes to the statements 35. During the current fiscal year, Mountain View City’s water utility, an enterprise fund, rendered billings for water supplied to the general fund. Which of the following accounts should be debited by the general fund? a) Transfer-out to enterprise fund b) Due to water utility enterprise fund c) Appropriations d) Expenditures 36. Lakeside Art Center, a nongovernmental not-for-profit entity, receives a contribution of $5 million. The donor stipulates that the contribution must be used to acquire paintings by local artists. Lakeside should classify the contribution as a) Permanently restricted b) Temporarily restricted c) Committed d) Unrestricted 37. Wigmore City receives a donation of $10 million from a wealthy citizen who stipulates that the funds be used to acquire and install park benches in the city's Veterans Park. The city should report the donation as an increase in a) Unassigned fund balance b) Assigned fund balance c) Committed fund balance d) Restricted fund balance 38. The accounting equation applied by state and local governments is a) Assets + deferred inflows of resources - liabilities = fund balance b) Assets + deferred outflows of resources - liabilities - deferred inflows of resources = fund balance c) Assets + deferred inflows of resources = liabilities + deferred outflows of resources + fund balance d) Assets - deferred outflows of resources - liabilities + deferred inflows of resources = fund balance Granof Test Bank Chapter 2 Page 7 PROBLEMS (CHAPTER 2) 1. Assume that the City of Fort Smith maintains its books and records in a manner that facilitates the preparation of fund financial statements. For each of the following events indicate in which fund(s) of the city the event would be recorded and justify your fund selection. a. The city collected property taxes levied for the general operations of the city. General fund. The general fund is used to account for the general activities of a governmental entity. b. The city collected property taxes levied to pay principal and interest on bonds issued several years in the past to construct a new fire station. Debt service fund. The debt service fund is used to account for payments of principal and interest on debt incurred to finance general government activities. c. The city collected property taxes levied on a specific area of the city for the purposes of providing more frequent snow removal than is enjoyed by the rest of the city. Special revenue fund. The proceeds may only be used for snow removal. By accounting for the proceeds and for the expenditure of the proceeds in a special revenue fund the entity can demonstrate that it used the resources for the required purpose. d. The city sold bonds to finance the construction of a new city hall. Capital projects fund. A new city hall is a general government asset. The capital projects fund is used to account for the resources held for the purpose of construction and/or acquisition of major capital facilities. It is also used to account for expenditures for the construction and/or acquisition of those assets. e. The city sold bonds to finance major renovations at the city-owned electric utility. Enterprise fund. Normally, governments use enterprise funds to account for activities for which there are comparable activities in the private sector. If the electric utility is accounted for in an enterprise fund, all capital assets and all long-term debt associated with those activities will be accounted for in the enterprise fund. f. The city purchased a street sweeping machine. General fund. The general fund is used to account for the general activities of a government. However, only the expenditure for the machine would be reported in this fund. The machine (a capital asset) is reported only in the government-wide financial statements. 2. Assume that the City of Amber maintains its books and records in a manner that facilitates the preparation of fund financial statements. Amber City maintains a general fund, a capital projects fund, and a special revenue fund. During the current fiscal year, the city engaged in the following transactions. Record all transactions. Be sure to indicate clearly the fund in which the entry is made. a. The city sold bonds, face value $26 million, at par to finance the construction of a new city hall. a. CAPITAL PROJECTS FUND Cash $26 million Proceeds from borrowing $26 million b. The city purchased two new police cars at a total cost of $50,000. GENERAL FUND Vehicle expenditure $ 50,000 Cash Granof Test Bank Chapter 2 $ 50,000 Page 8 c. The city collected $8,000 in taxes dedicated for the eradication of noxious weeds. c. SPECIAL REVENUE FUND Cash $ 8,000 Tax revenue $ 8,000 d. The city spent $6,000 on pesticides for noxious weeds. d. SPECIAL REVENUE FUND Expenditures for weeds $ 6,000 Cash $ 6,000 e. The city acquired a new tractor for $80,000. The city paid $20,000 in cash and signed a note that is due in three years. e. GENERAL FUND Tractor expenditure $80,000 Proceeds of note $ 60,000 Cash 20,000 3. Assume that Blackfoot County maintains its books and records in a manner that facilitates the preparation of fund financial statements. The county engaged in the following transactions during the current month. Prepare journal entries in the general fund to record these events. a. Paid salaries to county employees, $100,000. a. Expenditures-salaries $100,000 Cash $100,000 b. Borrowed $35,000 on a three-year note from a local bank to buy a county car. b. Cash $ 35,000 Proceeds of notes $ 35,000 c. Purchased the county car for $35,000. c. Automobile expenditure $ 35,000 Cash $ 35,000 d. Made a $7,000 payment on outstanding accounts payable. d. Accounts payable $ 7,000 Cash $ 7,000 e. Collected $3,500,000 of the current property tax levy. e. Cash $3,500,000 Property tax revenue $3,500,000 f. Received a $50,000 grant from the State to support general government activities. f. Cash $ 50,000 Grant revenue $ 50,000 Granof Test Bank Chapter 2 Page 9 4. Kayla Township issued the following bonds during the year:  Ten-year bonds to acquire equipment for a data processing service reported in an internal service fund  Bonds to construct a new police station  Bonds to increase the capacity of the water treatment plant reported in an enterprise fund $2,000,000 $9,000,000 $4,800,000 a. The amount of debt reported in the Township’s general fund is: 1. $0 2. $9,000,000 3. $11,000,000 4. $15,800,000 b. The township should report depreciation expense on related new capital assets in: 1. General fund 2. Enterprise fund 3. Enterprise and internal service funds 4. Capital projects fund c. The bonds issued to construct the new police station should be reported as: 1. Debt proceeds in the general fund 2. Long-term debt in a debt service fund 3. Debt proceeds in a capital projects fund 4. None of the above d. In accordance with bond covenants the township sets aside $1,000,000 to help ensure that it is able to meet its first payment of principal and interest on the police station debt due one year from the date the bonds were issued. The amount of liability that the township should report in its debt service fund is: 1. $0 2. $1,000,000 3. $9,000,000 4. $8,000,000 Granof Test Bank Chapter 2 Page 10 5. The Chessie Foundation, a newly established governmental entity, engaged in the following transactions: 1. A donor made a $1,000,000 pledge, giving the foundation a legally enforceable 90-day note for the full amount. No entry necessary — no cash involved. 2. The same donor paid $500,000 of the amount pledged. Cash $ 500,000 Contribution revenues $ 500,000 To record the partial collection of the note 3. The foundation purchased a building for $900,000, paying $90,000 in cash and giving a ten-year mortgage for the balance. The building has a 25-year useful life. The foundation charges a half-year’s depreciation for all assets in the year they are acquired. Building acquisition expenditure $ 90,000 Cash $ 90,000 To record the cash paid to acquire the building 4. The foundation hired five employees. By year-end, these employees have earned $10,000 in salaries and wages for which they have not been paid. The foundation accounts for its activities in a single fund. No entry necessary — no cash involved Focus on cash plus current financial resources a. Prepare journal entries to record the transactions, making the following alternative assumptions as to the fund’s measurement focus:  Cash only  Cash plus other current financial resources (cash plus short-term receivables less short-term payables)  All economic resources b. Based on your entries, prepare appropriate operating statements and balance sheets for the organization. No entry necessary — no cash involved 6. Katerah City maintains the following funds: 1. 2. 3. 4. 5. 6. 7. 8. General Special revenue Capital projects Debt service Enterprise Investment trust Permanent Agency For each of the following transactions, indicate which fund would most likely be used to report the transaction: Granof Test Bank Chapter 2 Page 11 a. The city collects $1 million of taxes for an independent fire district located within the city. Agency b. The city spends $1.2 million on street maintenance using the proceeds of a city gas tax dedicated for road and highway maintenance and improvements. Special revenue c. The city receives a bequest of $1.5 million. The donor’s will, requires that the principal amount be invested in perpetuity and that the earnings on the investment be used to maintain a city park to be renamed for the donor. Permanent d. The city collects water and sewer fees of $4.2 million. Enterprise e. The city pays $4 million to a contractor for work on a new bridge. Capital projects f. The city receives $1.3 million to invest on behalf of the county. Investment trust g. The city pays its police officers wages of $325,000. General h. The city pays $2.2 million in bond interest on its general obligation debt. Debt service Granof Test Bank Chapter 2 Page 12 7. The Geneva Housing Authority, a governmental entity, accounts for its activities on a modified accrual basis of accounting. In the current period, it reports the following transactions:     The Authority issued $2.5 million in long-term bonds. The Authority purchased 4 acres of land for $500,000 in cash. It sold one of the 4 acres of land for $125,000 in cash. It made a $325,000 payment on the debt, consisting of $75,000 of interest and $250,000 of principal.  It lost a lawsuit filed by one of its renters and was ordered to pay $1 million in damages over 5 years. It made its first cash payment of $200,000. 1. Prepare journal entries to record each of these transactions in the general fund. Cash $2,500,000 Proceeds from borrowing $2,500,000 To record the issuance of bonds 2. Based on your entries, prepare a balance sheet and statement of revenues, expenditures, and changes in fund balance for the general fund. Expenditure for land $ 500,000 Cash $ 500,000 To record the purchase of land 3. Comment on how these statements capture the Authority’s economic resources and obligations. Cash $ 125,000 Proceeds from sale of land $ 125,000 To record sale of land 4. Comment on the extent to which the statement of revenues, expenditures, and changes in fund balances captures the Authority’s costs of services. Repayment of bonds (expenditure) $ 325,000 Cash $ 325,000 To record repayment of bonds 5. When the Authority prepares GAAP financial statements based on GASB Statement No. 34, what assets and liabilities would be added in the Authority’s government-wide Statement of Net Assets? What gains and losses would be added in its government-wide Statement of Activities? Legal claims (expenditure) $ 200,000 Cash $ 200,000 To record payment of judgment 8. The newly established Environmental Council (a nongovernmental not-for-profit organization) uses two funds for internal reporting purposes. The general fund is used to record day-to-day operating transactions. A building fund is used to accumulate resources for a new building to house the Council’s operations. Both funds are reported using the accrual basis of accounting. In its first year, the Council engaged in the following transactions: 1. It received cash contributions of $500,000. Donors stipulate that $100,000 of this amount must be used for the new building. 2. It incurred operating payroll costs of $200,000, of which $180,000 is paid in cash. 3. It earned $1,000 in interest (paid in cash) on investments restricted to the acquisition of the new building. Granof Test Bank Chapter 2 Page 13 4. It transferred $25,000 from its general fund to the building fund. 5. It paid $15,000 in fees (accounted for as expenses) for architectural drawings for the proposed building. a. Prepare journal entries to record the transactions. Be sure to indicate the fund in which the entry would be made. b. Prepare a statement of revenues, expenses, and other changes in fund balances and a balance sheet. Use a two-column format, one column for each of the Council’s two funds. Granof Test Bank Chapter 2 Page 14 ESSAYS (CHAPTER 2) 1. Why do governments and not-for-profit entities use fund accounting? 1. Government and not-for-profit entities use fund accounting to demonstrate accountability. By segregating the assets, entities are able to demonstrate clearly that the assets were used for the intended purposes. By segregating certain activities, governments can better control the revenues and expenditures/expenses of these activities. It would not be uncommon for governments and not-for-profit entities to segregate assets whose use is restricted by outside donors, nor would it be uncommon for these entities to segregate the revenues and expenses of activities that are supposed to be self-supporting. 2. Governments use the modified accrual basis of accounting and a current financial resources measurement focus when presenting the governmental fund financial statements but they use the accrual basis of accounting and the flow of economic resources for the government-wide financial statements. What is a basis of accounting? What is measurement focus? How does the selection of one affect the selection of the other? 2. Basis of accounting determines WHEN transactions and events are recognized. Measurement focus determines WHAT is being reported upon. If an entity selects the cash basis of accounting, its measurement focus will necessarily be upon the flow of cash. If an entity selects full accrual accounting its measurement focus will, of course, be upon flow of economic resources, including noncurrent as well as current resources. An entity must decide WHAT assets and liabilities it wants to display (e.g., cash, current financial resources, or all economic resources) and choose a basis of accounting that will enable the entity to display those assets and liabilities. 3. For what purposes do governmental entities use agency funds? What are the distinguishing characteristics of agency funds? Agency funds are used to account for assets that a government holds temporarily on behalf of other governments, private organizations, or individuals. Agency funds are mechanisms for segregating, on financial reports, assets held for others, to demonstrate accountability and stewardship. Because agency funds are merely lists of assets held for others, with a corresponding obligation to those parties, agency funds have no operating accounts and no equity accounts. The accounting equation is assets = liabilities. 4. The basic financial statements for Ammon City contain the following statements. For each statement identify the appropriate measurement focus and basis of accounting. a.) b.) c.) d.) e.) f.) Government-wide statement of position Government-wide statement of activities Balance sheet—governmental funds Statement of revenues, expenditures, and changes in fund balance—governmental funds Statement of net assets—proprietary funds Statement of revenues, expenses, and changes in fund net assets—proprietary funds b.) c.) d.) e.) f.) Economic resources; accrual Economic resources; accrual Current financial resources; modified accrual Current financial resources; modified accrual Economic resources; accrual Economic resources; accrual a.) Granof Test Bank Chapter 2 Page 15 5. The activities of an internal service fund are presented on the statement of revenues, expenses, and changes in fund net assets in the fund financial statements. Why? 6. What are the three categories of restrictions that must be used to report the resources of not- for-profit organizations? Who must impose the restrictions in order for them to be reported? The activities of an internal service fund are presented on thestatement of revenues, expenses, and changes in fund net assets because they are part of the proprietary fund category. Proprietary funds are reported using the economic resources measurement focus and the accrual basis of accounting to provide information about the full cost of the activities reported in those funds. 7. Why is long-term debt generally not reported in a government’s debt service funds? Generally long-term debt is not reported in the debt service fund because these funds are maintained on the modified accrual basis of accounting to account only for the current financial resources that will be used to pay the interest and principal on long-term debt. These resources are set apart from other resources because they can only be used for their specified purposes. The principal and interest payments on the long-term debt that are currently due and payable are reported in the debt service fund that will service the long-term debt. 8. What are fiduciary funds? Why don’t governments incorporate (consolidate) these funds into their government-wide financial statements? Fiduciary funds are used to account for resources held by the government as either a trustee (a party that administers property for a beneficiary) or an agent (one who acts on behalf of another). Governments do not incorporate (consolidate) fiduciary funds into their government-wide financial statements because they benefit only outsiders and a government cannot expect to have use of their resources. 9. The City of Orlando maintains funds for debt service, capital projects, and special revenues. It does not, however, maintain funds for police, recreation, and general administration. Why do you suppose it does not maintain a separate fund for each of its functional areas? 9. Funds are not maintained for organizational units. They are established only for resources that are restricted. Typically the resources for the key functional areas are provided by unrestricted tax revenues. 10. GASB Statement No. 34 mandates that the government reconcile total governmental fund balances per the fund balance sheet with net assets of governmental activities per the government-wide statements. What are likely to be the two largest reconciling items for most major cities? Why? Long-lived assets and long-term liabilities. These are recorded on the government-wide statements but not the fund statements as the former are on a full accrual basis but the latter are on a modified accrual basis 11. What are the elements of the financial statements of state and local governments? Which elements relate to statements of net position? How do these elements differ from those reported by businesses? 11. The elements of the financial statements of state and local governments are: assets, liabilities, outflows of resources, inflows of resources, deferred outflows of resources, deferred inflows of resources, and net position. Acceptable formats for reporting the elements relating to statements of net position are: Assets + deferred outflows of resources = liabilities + deferred inflows of resources + net position (or fund balance) or alternatively, Assets + deferred outflows of resources – liabilities – deferred inflows of resources = net position (or fund balance). Thus, deferred outflows and inflows of resources are reported in separate categories from assets and liabilities. In contrast, businesses generally use the reporting format: assets – liabilities = owners’ equity. Although businesses do distinguish deferred Granof Test Bank Chapter 2 Page 16 resource flows, such as deferred revenues and deferred costs, from current resources flows, they report deferred resources flows among, respectively, liabilities and assets rather than in separate categories. 12. Compare a restricted fund balance with a committed fund balance. Give an example of when a government might use each classification. 12. For a fund balance to be restricted, the constraints on the use of resources must be imposed by parties external to the government, such as creditors, bondholders, or grant providers, or through constitutional provisions, enabling legislation, or laws or regulations of other governments. For example, a federal agency provides grants to a state government for use only to enhance state highway patrol activities. In this case, fund balance should be restricted because the constraint is imposed by a party (federal agency) that is external to the state government. Restrictions on resources may only be changed or removed with the consent of the providers. In contrast, committed fund balances comprise resources that must be used for specific purposes based on constraints imposed by formal action of the government’s own highest level of decision-making authority. For example, the governing body of a state college commits resources to improve the provision of student health services. In this case the constraint is imposed by the government’s own highest-level authority, not by a party external to the government. The constraints governing commitments can only be changed or removed by the same formal action that originally imposed them. Granof Test Bank Chapter 2 Page 17 Chapter 3 Issues of Budgeting and Control TRUE/FALSE (CHAPTER 3) 1. Capital budgets focus on plans for the acquisition and construction of fixed assets. T 2. The accounting cycle for most governments is two to three years, consistent with the terms of elected officials. F 3. Most budgets are prepared on a cash or modified cash basis. T 4. Neither the GASB nor the FASB sets standards for budgetary accounting. T 5. State and local governments must prepare their GAAP budgetary comparisons on the modified accrual basis of accounting. F 6. When budgets are integrated into a government’s accounting system, estimated revenues are debited. T 7. Encumbrances and expenditures both reduce total fund balances of state and local governments. F 8. Not-for-profit budgets focus first on revenues and secondarily on expenditures. T 9. State and local governments’ budget-to-actual comparisons present both original and final budget amounts. T 10. Cash-basis budgets help governments focus on interperiod equity. F 11. Reserve for encumbrances accounts should be closed at year-end. F 12. Capital budgets concentrate on long-lived assets. T Granof Test Bank Chapter 3 Page 1 MULTIPLE CHOICE (CHAPTER 3) 1. Which of the following is NOT a function of a budget in the governmental environment? a) Planning. b) Organizing. c) Controlling. d) Evaluating. 2. For which of the following funds would flexible budgeting be most valuable? a) Special revenue fund. b) Capital projects fund. c) Agency fund. d) Enterprise fund. 3. Property taxes levied on the citizens of the Hill County would most appropriately be budgeted in which of the following budgets? a) Operating budget. b) Capital budget. c) Flexible budget. d) All of the above. 4. Expenditures should be budgeted by “character.” An example of a character classification would be a) Current expenditures. b) Salaries. c) Public Safety. d) Police Department. 5. Which of the following is a primary benefit of a performance budget? a) It facilitates control by establishing rigid spending mandates. b) It encourages accomplishment of objectives by associating expenditures with outcomes. c) It encourages planning by requiring management to anticipate every type of expenditure. d) It provides decision-makers with detailed information. 6. Which branch of local (city and county) government most commonly prepares the budget? a) Executive branch. b) Legislative branch. c) Judicial branch. d) None of the above. 7. An officially adopted budget is generally called a) An appropriation bill. b) An operating budget. c) A capital budget. d) None...
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Explanation & Answer

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Re-accommodating
Passengers In Thai ABC
Airline
Team members
BUS 561: Management Information Systems

Class section
Contact information
Submission date

Problems Identified


According to the Case Study, Bob, the Thai ABC
Airline’s senior vice president, identified several key
problems and issues that were affecting their flights
causing a major poor customer satisfaction rate since its
merger with Thai XYZ Airline (Chongwatpol, 2016).



The identified key problems and issues include:
i.

Customer complaints due to increased
delayed/canceled flights.

ii.

Increased Overbooking cases

Problems Identified II


In addition to the previously identified problems, other
issues or challenges probing Thai XYZ airline include;
I.

Passengers dissatisfaction about the Thai ABC Airline
services.

II.

mechanical problems about the airline

III. unhelpful and

inconsiderate customer care service

IV. addressing

of refunds in the case of lost or unused
tickets, fare adjustments, and missing flights

V.

Damaged, lost or delayed customer luggage

Evaluation of the Case


Generally, this Case Study Report/Analysis focuses on
several different parts of the Case Study, which include
the following;



The critical key issues and problems facing Thai ABC
Airline, including the categories of the passenger
complaints affecting the company



The short-and long-term solutions implemented by Bob,
the Airline’s senior president of to address the reported
key problems/issues

Evaluation of the Case II


The outcome of the merger of two erstwhile competitor
carriers, Thai XYZ Airline and Bangkok ABC Airline



The history and reasons behind the merger between the
two Airlines



Lastly, the perennial issue route: BKK –HKG-ORD – in
the past 8 months, there is a significant increase in
demands for flights to the U.S. due to the gradual
decline in flights to Europe.

Evaluation of the Case III


Fundamentally, the parts that are working include the
implemented new technique of re-accommodating
customers, rebooking scheme, proper handling and
treatment of delayed passengers, etc.



Contrary, the parts that are not working include the merger
between Thai XYZ Airline and Bangkok ABC Airline, the
booking scheme that was based on fare and class, the
problems faced by the company, etc.



Some of these parts of the Case Study are not working due
to several reasons.

Evaluation of the Case IV


For the last two centuries, mergers and acquisitions
(M&A) have been the most preferred strategic tools of
organizations to generate greater economic efficiency and
facilitate faster growth (Kumar & Sharma, 2019).
 Unfortunately, it is estimated that more than 50% of M&A
occur to be utter failures (Kumar & Sharma, 2019).
 One of the perfect examples is based on this Case Study.
 Although the merger was seen as a business opportunity
by Bangkok ABC Airline after all its goals merged, the
company saw a great deal of misfortunes and critical
issues that caused a major decline in its overall profits.

Evaluation of the Case V


Possibly, these emerge failed due to regulatory
problems, insufficient research, or poor planning.



Furthermore, the delayed and canceled flights may have
possibly been caused by a lack of delay prediction
technologies and methods (Musaddi et al., 2018).



In this case, it becomes difficult for the operators to
predict the delays.

Evaluation of the Case VI


According to Musaddi et al. (2018), many factors can
cause flights to delay across the globe, but Airlines can
use a binary classification model to predict whether a
flight will be delayed or not (34).
 Generally, the Thai ABC Airline failed to tackle these
critical issues/problems of mechanical aspects due to the
lack of new technologically exceptional airplanes that
offer both better systems maintenance and fuel
efficiency.
 Some of these delays might be owing to poor airline
service quality and weather/climate problems (Sternberg
et al., 2017).

Proposed Solution(s)/Changes


Generally, following the issues/problems highlighted in this Case Study
that is facing Thai ABC Airline, there is the specific and practical
solution (s) or changes that the company can implement or embrace to
solve/address the issues significantly.
 Basically,
one of the practically proposed solutions needed is the improvement of
customer satisfaction and service quality, especially for delayed
passengers.
II. The company needs to invest heavily in new technologically advanced
airplanes that offer both better systems maintenance and fuel efficiency.
III. Passenger compensation in cases of delays or canceled flights (flight
cancellation compensation).
IV. Implementing and adapting to new ticketing technology such as
Application Programming Interface (API) and airline reservation systems
(ARS).
I.

Solution Selection Criteria








Basically, these solutions were chosen because of their
practicality in addressing the current issues/problems
facing Thai ABC Airlines.
There is a connection between customer satisfaction
and service quality. When service quality is increased,
the client satisfaction will also increase in response
and vice versa.
In the new global economy, firms believe that good
customer service has a profound impact on customer
satisfaction, which, in turn, increases profits and
market share.
Customer satisfaction also helps to increase loyalty
among customers (Hapsari, Clemes & Dean, 2017).

Solution Selection Criteria II


In this case, Thai ABC Airline could first address the issue of poor
client satisfaction by improving its overall quality services,
particularly in how the Airline treated its clients after delaying.



Having better services that focus on improving delays and
cancellations of flights can have a major impact on the overall issues
facing Thai ABC Airline.



With the increase in stiff market competition in the Airline Industry,
Airline companies are forced to improve their overall customer
loyalty by improving their service quality in order to increase
profitability (Hapsari, Clemes & Dean, 2017).



This will significantly help to address the unhelpful and inconsiderate
custom...

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