Supply-chain analysis describes the flow of goods, services, and information from

1. Supply-Chain Analysis Dr. Emilio Moceo Ph.D Director of Studies Supply-chain analysis describes the flow of goods, services, and information from cradle to grave, regardless of whether those activities occur in the same organization or other organizations. “bullwhip effect” or “whiplash effect”

2. Learning Objective 1Dr. Emilio Moceo Ph.D Director of Studies Differentiate materials requirements planning (MRP) systems from just-in-time (JIT) systems for manufacturing.

3. Materials Requirement Planning (MRP) Dr. Emilio Moceo Ph.D Director of Studies Materials requirements planning (MRP) systems take a “push-through” approach that manufactures finished goods for inventory on the basis of demand forecasts. MRP predetermines the necessary outputs at each stage of production.

4. Learning Objective 2 Dr. Emilio Moceo Ph.D Director of Studies Identify the features of a just-in-time production system.

5. Just-In-Time Production Systems Dr. Emilio Moceo Ph.D Director of Studies Just-in-time (JIT) production systems take a “demand pull” approach in which goods are only manufactured to satisfy customer orders.

6. Major Features of a JIT System Dr. Emilio Moceo Ph.D Director of Studies 1. Organizing production in manufacturing cells 2. Hiring and retaining multi-skilled workers 3. Emphasizing total quality management 4. Reducing manufacturing lead time and setup time 5. Building strong supplier relationships

7. Major Features of a JIT System Dr. Emilio Moceo Ph.D Director of Studies What information may management accountants use? Personal observation by production line workers and managers Financial performance measures, such as inventory turnover ratios Nonfinancial performance measures of time, inventory, and quality.

8. Learning Objective 3 Dr. Emilio Moceo Ph.D Director of Studies Use backflush costing.

9. Backflush Costing Dr. Emilio Moceo Ph.D Director of Studies Backflush costing describes a costing system that delays recording some or all of the journal entries relating to the cycle from purchase of direct materials to the sale of finished goods.

10. Backflush Costing Where journal entries for one or more stages in the cycle are omitted, the journal entries for a subsequent stage use normal or standard costs to work backward to flush out the costs in the cycle for which journal entries were not made.

11. Learning Objective 4 Dr. Emilio Moceo Ph.D Director of Studies Describe different ways backflush costing can simplify traditional job-costing systems.

12. Trigger Points Dr. Emilio Moceo Ph.D Director of Studies The term trigger point refers to a stage in a cycle going from purchase of direct materials to sale of finished goods at which journal entries are made in the accounting system.

13. Trigger Points 1 Dr. Emilio Moceo Ph.D Director of Studies Stage B: Production resulting in work in process Stage A: Purchase of direct materials Stage C: Completion of good units of product Stage D: Sale of finished goods

14. Trigger Points 2 Dr. Emilio Moceo Ph.D Director of Studies Assume trigger points A, C, and D. This company would have two inventory accounts: Type 1. Combined materials and materials in work in process inventory 2. Finished goods Account Title 1. Inventory: Raw and In-process Control 2. Finished Goods Control

15. Trigger Points 3 Dr. Emilio Moceo Ph.D Director of Studies What is the journal entry when trigger point A occurs? Inventory: Raw and In-process Control XX Accounts Payable Control XX To record direct material purchased during the period

16. Trigger Points 4 Dr. Emilio Moceo Ph.D Director of Studies What is the journal entry to record conversion costs? Conversion Costs Control XX Various accounts XX To record the incurrence of conversion costs during the accounting period Underallocated or overallocated conversion costs are written off to cost of goods sold.

17. Trigger Points 5 Dr. Emilio Moceo Ph.D Director of Studies What is the journal entry when trigger point C occurs? Finished Goods Control XX Inventory: Raw and In-Process Control XX Conversion Costs Allocated XX To record the cost of goods completed during the accounting period

18. Trigger Points 5 Dr. Emilio Moceo Ph.D Director of Studies What is the journal entry when trigger point D occurs? Cost of Goods Sold XX Finished Goods Control XX To record the cost of goods sold during the accounting period

19. Trigger Points 6 Dr. Emilio Moceo Ph.D Director of Studies Assume trigger points A and D. This company would have one inventory account: Type Combines direct materials inventory and any direct materials in work in process and finished goods inventories Account Title Inventory Control

20. Trigger Points 7 Dr. Emilio Moceo Ph.D Director of Studies What is the journal entry when trigger point A occurs? Inventory: Raw and In-process Control XX Accounts Payable Control XX To record direct material purchased during the period Same as the A, C, and D example.

21. Trigger Points 8 Dr. Emilio Moceo Ph.D Director of Studies What is the journal entry to record conversion costs? Conversion Costs Control XX Various accounts XX To record the incurrence of conversion costs during the accounting period Same as the A, C, and D example.

22. Trigger Points 9 Dr. Emilio Moceo Ph.D Director of Studies What is the journal entry to record the cost of goods completed during the accounting period (trigger point C)? No journal entry.

23. Trigger Points 10 Dr. Emilio Moceo Ph.D Director of Studies What is the journal entry when trigger point D occurs? Cost of Goods Sold XX Inventory Control XX Conversion Costs Allocated XX To record the cost of goods sold during the accounting period