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The Production Business Process

Chapter 9. The Production Business Process. Describe transaction cycle controls that are used in the production business process. Learning Objective 1. Production Control. Production Departments. Inventory Control. Cost Accounting. General Ledger. Inventory status reports.

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The Production Business Process

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  1. Chapter 9 The ProductionBusiness Process

  2. Describe transaction cycle controls that are used in the production business process. Learning Objective 1

  3. Production Control Production Departments Inventory Control Cost Accounting General Ledger Inventory status reports Inventory status reports Raw materials Finished goods Factor availability report Factor availability report Transaction Flow in aProduction Control Application

  4. Production order Production order 1 2 Post to WIP records Journal voucher Journal voucher Materials placed in production Completed production order Post to inventory records N 2 Transaction Flow in aProduction Control Application Production Control Production Departments Inventory Control Cost Accounting General Ledger Production order 1 2 3

  5. Material requisition 1 Attach to completed production order Material requisition 2 3 1 Material requisition N Post to WIP records 2 Completed production order Post to inventory records N 2 Transaction Flow in aProduction Control Application Production Control Production Departments Inventory Control Cost Accounting General Ledger Material requisition 1 2 3 4

  6. Production schedule Journal voucher Journal voucher 1 Conversion costs Job time cards Job time cards D Post to WIP records Transaction Flow in aProduction Control Application Production Control Production Departments Inventory Control Cost Accounting General Ledger Production schedule 1 2

  7. Production status Completed production order Completed production order 2 2 Summarize production Journal voucher Journal voucher Completed production cost report Cost of goods manufactured To management Transaction Flow in aProduction Control Application Production Control Production Departments Inventory Control Cost Accounting General Ledger Production status

  8. Cost Accounting The cost accounting department is responsible for maintaining a file of WIP records.

  9. Inventory Control Inventory use Inventory balances Minimum and maximum levels of stock Reorder point Economic order quantity (EOQ)

  10. EOQ = 2 × R × S P × I Inventory Control R = requirements for the item this period S = purchasing cost per order P = unit cost I = inventory carrying cost per period.

  11. Inventory Control Lead Time Inventory Usage Rate Reorder point = Lead time × Average inventory usage rate

  12. Just-in-Time (JIT) Production Just-in-time production is a term used to describe a production system in which parts are produced only as they are required in subsequent operations.

  13. Vendor Operation 1 Raw materials inventory Work-in- process inventory Operation 2 Customer Finished goods inventory Just-in-Time (JIT) Production

  14. Describe the major features of a property accounting business process. Learning Objective 2

  15. Property transactions Periodic comparison Reconciliation of discrepancies Investments and fixed assets Property ledgers Periodic processing Record in property ledgers Depreciation calculations Insurance and replacement costs reports Other management reports Property AccountingApplication System

  16. Fixed assets Investments Fixed Assets and Investments

  17. Fixed Assets orInvestment Accounting Maintain adequate records Provide for appropriate depreciation and/or amortization. Provide for reevaluation for insurance and replacement cost purposes. Provide management with reports.

  18. Fixed Assets orInvestment Accounting Fixed Assest Register Investment Register

  19. Identify and describe key components of computer integrated manufacturing (CIM) systems. Learning Objective 3

  20. CIM Advanced technologies Quick-response manufacturing system Quick-ResponseManufacturing Systems Physical manufacturing system (MRP II) system

  21. Physical manufacturing system Manufacturing resource planning (MRP II) CADD CAM MRP Quick-ResponseManufacturing Systems Quick-response manufacturing system Computer Integrated Manufacturing System (CIM)

  22. Computer-based information system EDI Automatic identification Quick-ResponseManufacturing Systems Advanced Integration Technologies Distributed databases Distributed databases

  23. The Physical Manufacturing System Two subsystems directly support the physical manufacturing system. What are these? CADD (computer-aided design and drafting) CAM (computer-aided manufacturing)

  24. Computer-Aided Designand Drafting (CADD) Solids modeling Finite element analysis Automated drafting

  25. Computer-AidedManufacturing (CAM) Industrial robot Statistical process control Flexible manufacturing systems

  26. The Manufacturing Resource Planning (MRP II) System The MRP II system comprises the materials requirements planning (MRP) systemand the related systems for sales, billing, and purchasing.

  27. Production planning Production scheduling Cost accounting Reporting Materials RequirementsPlanning (MRP) MRP

  28. Advanced Integration Technologies Automatic Identification EDI Distributed Processing

  29. Depict the flow of processing necessary to support Manufacturing Resource Planning (MRP II) systems. Learning Objective 4

  30. Production Planning Production planning involves the determination of which products to produce and the scheduling of production to make optimal use of production resources.

  31. Production Planning Demand for a product Production requirements Production resources available

  32. Marketing 1 2 4 Inventory control Production departments 3 5 Bill of materials Master operations list Production Planning 1 Sales forecast 2 Finished goods status 3 Raw materials status 4 Factor availability report 5 Production schedule Production planning

  33. Bill-of- materials file Master production plan Master operations file Production status file Production Planning Production planning program(s)

  34. Production Planning Production orders Material requisitions Routings Updated production status file

  35. Production status file Routing file Summary report Updated production status file Production loading file Production Scheduling Production status update

  36. Production scheduling program Summary report Production schedules Production Scheduling Production loading file

  37. Production-Loading File This is the major input to the production-scheduling application.

  38. Production status file Production data file • Material • requisition • data • RTG data Summary report Updated production status file Completed production order file Resource usage file Cost Accounting Cost accounting program(s)

  39. Inventory file Completed production order file Updated inventory file Finished goods stock status report Completed production cost report Summary report Reporting Inventory Processing Inventory update

  40. Resource usage file Report generator Resource usage reports Reporting Resource Usage Reporting

  41. Describe why activity-based costing is particularly relevant to CIM systems. Learning Objective 5

  42. Activity-Based Costing Traditional cost accounting techniques may be inadequate in a computer integrated manufacturing environment. Why? Because CIM reduces direct labor and increases overhead. Variable costs decrease and fixed costs increase.

  43. Activity-Based Costing Activity-based costing (ABC) calculates several overhead rates, one for each manufacturing activity.

  44. Activity-Based Costing What are some examples of activities? Machine centers Material handling Inspection stations Manual assembly A single department may contain several different activities.

  45. Bill-of-materials module Routings file module Master production scheduling module Production order module Inventory control module Production activity control module Major Processing Modules in MRP II MRP II

  46. Implementing JIT in aMRP II/CIM Environment Push vs. Pull Less emphasis might be placed on a complete MRP II system.

  47. Special Internal Control Considerations Transactions may be processed without human intervention or approval. This eliminates conventional controls associated with separation of duties in transactions.

  48. Special Internal Control Considerations Extensive controls and audit trails may be implemented in quick-response manufacturing systems. These features must be included within the design and development of the system. Systems development is critical in quick-response manufacturing systems.

  49. End of Chapter 9

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