The Flow of Information in The Production Cycle Analysis of Flowchart One By Group One

What is the Production Cycle? A recurring set of business activities and related data processing operation associated with the manufacture of products

Context Diagram of Production Cycle Customer Orders Purchase Requisitions Revenue Cycle Expenditure Cycle Finished Goods Raw Materials Sales Forecasts Over-head Production Cycle Cost of goods manufactured Labor Needs General Ledger Labor Costs HRM/Payroll Cycle Reports Management

Flowchart Symbols Document Input/Output: Journals/Ledgers Computer Processing resulting in change in data or information Data stored on magnetic disks

Where to Start? Is demand known? Yes. Then MRP-11, where purchase order is starting point No. Then JIT, where sales order is the starting point

Major Information Flows in the Production Process Sales/ Collections Process Planning Control Process Acquisitions/ Payment Process Standard Costs Prodution Order Sales Order Purchase Order Raw Materials Inventory Management Finished Goods Inventory Management Cost Standards Production Management Receiving Report Raw Materials Inventory Finished Goods Inventory Cost of Goods Sold Work In Process Inventory Cost Accounting Completion of Production Vendor Invoice Raw Material Inventory Status Report Cost Activity or Standard Cost Variances Report Work In Process Inventory Status Report Finished Goods Inventory Status Report Time Card / Labor Ticket

Basic Activities Product Design Planning/scheduling Production operations Cost Accounting

Cost Accounting Information in The Production Cycle Accurate and timely accounting information for decisions in: Product Mix Product Pricing Resource Allocation and Planning Cost Management

Cost Accounting To make these decisions, more detailed information is required about costs are needed than those needed to prepare financial statements. Cost accounting provides information for planning, controlling, and evaluating production operations.

Purchase Order Receiving Report Vendor Invoice Raw Materials Inventory Management Purchase Order Receiving Report Raw Materials Inventory Vendor Invoice Raw Material Inventory Status Report

Report or Purchase Order If there is enough material then create a Raw Material Inventory Status Report If there is not enough material create a Purchase Order

Vendor Invoice Receive vendor invoice Revise the Raw Material Master file to see if we have enough material

Controls for Receiving Reports and Vender Invoices Segregation of duty Segregation of terminals Access controls requiring electronic signature Inspection of goods Verification of purchase order Materials requisition

Cost Accounting: Standard Cost Standard Cost Document: contains budgeted rates for labor/oh, cost of raw materials Are estimates from previous data, forecasted data, managerial creative input Inputed into Standard Cost File

Cost Accounting: Actual Costs Labor/OH costs from time cards/labor tickets Raw materials costs from raw material/inventory files

Cost Accounting: On-line Processing Appropriate accounts are debited/credited updating WIP/Inventory files Cost Activity Report/Cost Variance Report: accounting for differences in actual/estimated costs

Finished goods Inventory Management Production Order MRP system is used where demand is high and constant to reduce levels of inventory by scheduling production JIT Systems is not used here because it helps eliminate finished goods inventory Monitor vendor performance for delivery dependability and quality. Production Management Work in Process Inventory Finished Goods Inventory Completion Of Production

Production Management Finished goods Inventory management Finished goods Inventor Production Order Product quality Inventions Correct errors Reason for missing products Production Management Finished Goods Inventory Work in Process Inventory Completion Of Production

Finished goods inventory management Production Order Any defective products are scheduled for re-production or repaired Production Management Finished Goods Inventory Work in Process Inventory Completion Of Production

Work in Process Inventory Work in Process: Tasks done after raw materials process Done after Cost Accounting or Production Management Process

Sales/ Collection Process Production Process Sales/ Collection Process Completion of Production Use activity base costing to capture performance cost data by each cost driver Analyze bill of materials to identify which components are in use Finished Goods Inventory Cost of Goods Sold Completion of Production Finished Goods Inventory Status Report

Sales/ Collection Process Production Process Sales/ Collection Process Finish Goods Inventory Cost Accounting To collect and process information Calculate the inventory and cost of goods sold For company’s financial statement Finished Goods Inventory Cost of Goods Sold Completion of Production Finished Goods Inventory Status Report

Controls for Finish Goods Inventory Production Process Controls for Finish Goods Inventory Threats and Controls Recording and posting error resulting in inaccurate cost data Data entry edit controls; use of bar-code scanning; reconciliation of recorded amounts with periodic physical counts Lost of Data Back up and disaster recovery planning Poor Performance Improved and timelier reporting Finished Goods Inventory

Sales/ Collection Process Production Process Sales/ Collection Process Finished Goods Inventory to Finish Goods Inventory Status Report The batch total is retrieved in the Finish Goods Inventory to produce a Finish Goods Inventory Status Report Finished Goods Inventory Cost of Goods Sold Completion of Production Finished Goods Inventory Status Report

Sales/ Collection Process Production Process Sales/ Collection Process Finished Goods Inventory to Cost of Goods Sold Journal Entries The batch total from the Finish Goods Inventory is also sent to the Cost of Goods Sold Debit Accounts Receivable Credit Sales Debit Cost of Goods Sold Credit Inventory Finished Goods Inventory Cost of Goods Sold Completion of Production Finished Goods Inventory Status Report

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