CONVERSION Group 4:

Manguin

CYCLE
Nocillado
Puyo
Sagun
Sambat
Samiling
 CONVERSION CYCLE

consists of two subsystems:

• Production System

• Cost Accounting System

THE TRADITIONAL MANUFACTURING
ENVIRONMENT
 PRODUCTION METHODS

• Continuous Processing

• Make-to-Order Processing

• Batch Processing
DOCUMENTS IN THE BATCH PROCESSING
SYSTEM

• Production Schedule
• Bill of Materials (BOM)
• Route Sheet
• Work Order
• Move Ticket
• Materials Requisition
Production Schedule
Bill of Materials (BOM)
Route Sheet
Work Order
Move Ticket
Materials Requisition
 QUESTION No. 1

It records the work done in each work center.

a. Move Ticket
b. Work Order
c. Route Sheet
d. Bill of Materials
 QUESTION No. 2

The storekeeper releases raw materials based on the

a. Move Ticket
b. Production Schedule
c. Materials Requisition
d. Bill of Materials
 QUESTION No. 3

It is the formal plan and authorization to begin production.

a. Move Ticket
b. Production Schedule
c. Materials Requisition
d. Bill of Materials
 BATCH PRODUCTION ACTIVITIES
1. Production Planning and Control
a. Materials and Operations Requirement
b. Product Scheduling
2. Work Centers and Storekeeping
3. Inventory Control
Objective: "Minimize total inventory cost while ensuring that adequate
inventory exist of production demand."
-How much inventory should be purchased?
Economic Order Quantity= square root of (2DS/H)
-When should inventory purchased?
ReOrder Point= Ixd+S
Production Planning
and Control
R1: Uncalculated C1: PPC
production(surplu authorizes
s) production
activity via formal
work order
R2: Production C2: PPC separated
without formal from work centers.
documents Actual productions
are initiated upon
receipt of control
documents by work
centers
Work Centers and
Storekeeping
R3: Improper C3: Use of time
allocation of labor cards and job
tickets, together
with supervision of
managers
R4: Issuance of C4: Before actual
production takes
excess materials place, obtaining RM
from storekeeping in
exchange of Material
Requisition is needed.
Inventory Control
R5: Validity of RM C5: Periodically
and FG Inventory updating of inventory
records records; periodically
verification through
physical count by
auditors

R6: Collusion C6: Inventory Control

between maintains RM and FG
employees from inventory, separated
record keeping to from Materials
Storeroom and FG
asset inventory
warehouse
 Question No. 1

Inventory control performs all of the following tasks

except it
a. provides production planning and control with the inventory
status report of finished goods
b. updates the raw material inventory records
c. prepares a materials requisition for each production batch
d. records the completed production as an increase to finished
goods inventory
 Question No. 2

Which of the following is not an assumption of the

Economic Order Quantity model?
a. demand for the product is known with certainty
b. total cost per year of placing orders is fixed
c. lead time is known and is constant
d. there are no quantity discounts
 Question No. 3

What is the economic order quantity if the annual

demand is 60,000 units, set up cost of placing each order
is $900 and the holding cost per unit per year is $1200?
a. 300
b. 200
c. 100
d. 450
 CONTROLS IN TRADITIONAL
ENVIRONMENT
• TRANSACTION AUTHORIZATION
• Work order, move ticket, materials requisition
• SEGREGATION OF DUTIES
• IC separate from RM & FG inventory custody
• SUPERVISION
• ACCESS CONTROLS
• ACCOUNTING RECORDS
• Cost sheets, job tickets, WIP records, FG inventory file
• INDIVIDUAL VERIFICATION
• Cost accounting function reconciles all cost of production
 WORLD-CLASS COMPANY

✓Maintain strategic agility

✓Motivate and treat employees like
appreciating assets
✓Meet the needs of its customer
✓Philosophy of customer satisfaction
✓Philosophy of lean manufacturing
 LEAN MANUFACTURING
PRINCIPLES:
❖PULL PROCESSING-pulling products from consumer end
❖PERFECT QUALITY-to meet consumers’ demand
❖WASTE MINIMIZATION-eliminate non-value activities
❖INVENTORY REDUCTION-reduce inventory costs
❖PRODUCTION FLEXIBILITY-to produce diversity of products
❖ESTABLISHED SUPPLIER RELATIONS-reliable vendors
❖TEAM ATTITUDE-attitude as a whole of all employees
 Question No. 1

Production in lean manufacturing is initiated by:

a. Push
b. Pull
 Question No. 2

Goal of lean manufacturing:

a. Minimize control
b. Improved efficiency and effectiveness
c. Lessen production
 Question No. 3

PPC authorizes production activity via formal:

a. BOM
b. Work Order
c. Production Schedule
 TECHNIQUES & TECHNOLOGY THAT
PROMOTES LEAN MANUFACTURING
• PHYSICAL REORGANIZATION OF THE PRODUCTION
FACILITIES
Reorganizing and/or restructuring of the Manufacturing process in
order to improve its effectiveness and efficiency.

• AUTOMATION OF THE MANUFACTURING PROCESS

The replacement of human labour with autonomous or semi-
autonomous machinery.
 AUTOMATION OF THE MANUFACTURING PROCESS
(The replacement of labour with machinery.)

• Automation in Traditional Manufacturing - Consists of different kinds of

machines, each controlled by a single operator. Requires a great deal of setup time whose costs are
absorbed by massive production runs.

• Islands of Technology -Stand alone machines that are Computer Numerical

Controlled, which can perform multiple operations with minimal human involvement

• Computer Integrated Manufacturing -A completely automated

environment that aims to eliminate unnecessary processes in production.

• Automated Storage and Retrieval Systems (AS/RS) -Are

computer-controlled conveyor systems that carry raw materials and products across different
production departments. Replaced traditional Forklifts and their human operators. This helps
improve inventory control, and reduce errors and storage costs.
 Robotics -Manufacturing robots are useful for performing hazardous production tasks,
and are programmed to perform specific actions over and over with a high degree of precision.

Computer-Aided Design (CAD) -Is used by engineers to design product

faster. It increases their productivity by improving accuracy, automating repetitive tasks, and allowing
firms to adjust their production quickly to be more responsive to market demands.

Computer-Aided Manufacturing (CAM) -Uses computers to assist in

the manufacturing process. It utilises the CAD data and converts it into a series of processes in the
manufacturing process. Utilisation of this technology improves process productivity, cost and time
estimates, process monitoring and quality, decreased setup times and labour costs.

Value Stream Mapping -Is a very detailed graphical representation of a

company's business processes. It helps to thoroughly identify the aspects of it that are wasteful and
unessential, and therefore enabling them to be removed.
 Question No. 1

Consists of different kinds of machines, each

controlled by a single operator?
a. Automated Storage and Retrieval Systems
b. Robotics
c. Automation in Traditional Manufacturing
d. Cells
 Question No. 2

Are useful for performing hazardous production tasks,

and are programmed to perform specific actions over
and over with a high degree of precision.
a. Automaton Assisted Manufacturing
b. Automated Storage and Retrieval Systems
c. Robotics
d. A and C
 Question No. 3

Stand alone machines that are Computer Numerical

Controlled, which can perform multiple operations with
minimal human involvement
a. Computer-Aided Manufacturing (CAM)
b. Automated Manufacturing
c. Islands of Technology
d. Stand-alone systems
 ACCOUNTING IN A LEAN
MANUFACTURING
Require new accounting methods and new information that:

• Shows what matters to its customers

• Identifies profitable products
• Identifies profitable customers
• Identifies opportunities
• Encourages the adoption of value-added activities
and processes
• Efficiently supports multiple users
WHAT’S WRONG WITH TRADITIONAL
ACCOUNTING INFORMATION?
• Inaccurate Cost Allocations
• Promotes Nonlean Behavior
• Time Lag
• Financial Orientation

Activity-Based Costing (ABC)

❖ Activities - worked performed in a firm
❖ Cost Objects - reason for performing activities
 Advantages of ABC
Value Stream Accounting
• More accurate costing
• Identify most & least profitable
• Accurately tracking costs
• Equipping managers with cost intelligence
• Facilitating better marketing mix
• Identifying waste and non-value-added activities

Disadvantages of ABC
❖ Time-consuming and complicated
 Question No. 1

What’s wrong with traditional accounting

information?
a. Accurate Cost Allocations
b. Promotes Lean Behavior
c. Timeliness
d. Financial Orientation
 Question No. 2

All are advantages of ABC, except:

a. Identifying waste and non-value-added activities
b. Time-consuming and complicated
c. Facilitating better marketing mix
d. Equipping managers with cost intelligence
 Question No. 3

Require new accounting methods and new information

that:
a. Identifies profitable products
b. Identifies profitable customers
c. Encourages the adoption of value-added activities
and processes
d. Efficiently supports individual users
 INFORMATION SYSTEM THAT SUPPORTS
LEAN MANUFACTURING
A. Materials Requirements Planning (MRP)
● automated production planning and control system
used to support inventory management.
● Objectives: RM adequacy, inventory and schedules mgt.
● Answers: 1. What is needed? (RM)
2. How much is needed? (QTY)
3. When is it needed? (SCHEDULE)
INFORMATION SYSTEM THAT SUPPORTS
LEAN MANUFACTURING
B. Manufacturing Resource Planning (MRP II)
● integrates product manufacturing & engineering,
sales order processing, customer billing, human
resources, and related accounting functions.
● Includes labor hours, material costs and other
resources related to production.
 INFORMATION SYSTEM THAT SUPPORTS
LEAN MANUFACTURING
C. Enterprise Resource Planning (ERP) Systems
● Large suites of integrated function-specific modules;
capable of EDI with suppliers and customers.
● Improve customer service, reduce production time,
increase productivity, and improve decision making.
● Main objective is cost reduction in complex and big
companies.
● SAP, ORACLE, People Soft, Baan, JD Edwards.
 Question No. 1

MRP stands for

a. Materials Requirement Planning
b. Manufacturing Resources Planning
c. Manufacturing Resources Production
d. None of the Above
 Question No. 2

ERP Systems:
a. Improve customer service & reduce production time
b. Increase productivity & improve decision-making
c. A&B
d. None of the Above
 Question No. 3

Which Statement is TRUE?

a. ERP evolved directly from MRP
b. MRP and MRP II evolved from ERP
c. MRP II evolved from MRP and MRP II evolved into
ERP.
d. None of the Above
 Emergency Question No. 1

Automation of the manufacturing process is ?

a. Computer-Aided Manufacturing (CAM)
b. A completely automated environment that aims to
eliminate unnecessary processes in production.
c. Reorganizing and/or restructuring of the
Manufacturing process in order to improve its
effectiveness and efficiency.
d. The replacement of human labour with
autonomous or semi-autonomous machinery.
 Emergency Question No. 2

All of the following are characteristics of batch processing

except
a. each item in the batch is similar
b. batches are produced in accordance with detailed
customer specifications
c. batches are produced to replenish depleted inventory
levels
d. setting up and retooling is required for different
batches
 Emergency Question No. 3

Which is not a principle of lean manufacturing:

a. Team attitude
b. Perfect quality
c. Inventory maintenance
 Emergency Question No. 4

If the daily demand is 60 units and the lead time is 12

days, the reorder point is
a. 720 units
b. 270units
c. 072 units
d. none of the above