You are on page 1of 16

The Production Cycle

Chapter 14

Copyright 2015 Pearson Education, Inc.

14-1

Learning Objectives
Describe the major business activities and related
information processing operations performed in
the production cycle.
Identify major threats in the production cycle and
evaluate the adequacy of various control
procedures for dealing with those threats.
Explain how a companys cost accounting system
can help it achieve its manufacturing goals.
Discuss the key decisions that must be made in
the production cycle and identify the information
required to make those decisions.

Copyright 2015 Pearson Education, Inc.

14-2

Production Cycle Process

Copyright 2015 Pearson Education, Inc.

14-3

ERP Production Design Overview

Copyright 2015 Pearson Education, Inc.

Data Flow Diagram Production Cycle

Copyright 2015 Pearson Education, Inc.

Production Cycle Process


Product Design
Source documents: bill of materials and operations
list

Planning and Scheduling


Source documents: Master production schedule,
production order, and materials requisition

Production Operations
Cost Accounting
Copyright 2015 Pearson Education, Inc.

14-6

Threats and Controls Production Cycle

Copyright 2015 Pearson Education, Inc.

Threats and Controls Production Cycle

Copyright 2015 Pearson Education, Inc.

1. Product Design
2. Planning and Scheduling
Threats

Controls

1.

1 a. Analysis of costs arising from


product design choices
b. Analysis of warranty and
repair costs
2 a. Production planning systems
b. Review and approve
production orders and
schedules
c. Restrict access to orders and
schedules

Poor product design


resulting in excess costs
2. Over and under production

Copyright 2015 Pearson Education, Inc.

14-9

3. Production Operations
Threats

Controls

1.
2.
3.
4.

1 a. Restrict physical access


b. Document movement of
inventory
c. Segregation of custody duties
from authorization and
recording
2 a. Restrict access to fixed assets
b. Keep detailed records of fixed
assets including disposals
3 a. Performance reporting
4 a. Solicit competitive bids
5 a. Insurance and physical
safeguards
6 a. Backup and disaster recovery
plans
14-10

Inventory theft
Fixed asset theft
Poor performance
Suboptimal investments in
fixed assets
5. Loss of inventory or fixed
assets due to fire or disasters
6. Disruption of operations

Copyright 2015 Pearson Education, Inc.

4. Cost Accounting
Threats

Controls

1. Inaccurate cost data


2. Inappropriate allocation of
overhead costs
3. Misleading reports

Copyright 2015 Pearson Education, Inc.

1 a. Source data automation


b. Data processing integrity
controls
2 a. Time-driven activity-based
costing
3 a. Performance metrics
14-11

Cost Accounting Systems


Provide information for planning, controlling,
and evaluating the performance of production
operations
Provide accurate cost data about products for
use in pricing and product mix decisions
Collect and process the information used to
calculate the inventory and cost of goods sold
values that appear in organizations financials
Copyright 2015 Pearson Education, Inc.

14-12

Key Terms

Production cycle
Bill of materials
Operations list
Manufacturing resource
planning (MRP-II)
Lean manufacturing
Master production schedule
(MPS)
Production order
Materials requisition
Move ticket

Copyright 2015 Pearson Education, Inc.

Computer-integrated
manufacturing (CIM)
Request for proposal (RFP)
Job-order costing
Process costing
Job-time ticket
Manufacturing overhead
Activity-based costing
Cost driver
Throughput

14-13

??? Questions ???


What are the (a) account balances and (b)
quantities for your items in the 3 Inventory
Accounts:
Raw Materials (20000000 Wood Kit###),
Trading Goods (20020000 Cushion###), and
Finished Goods (20010000 Rocker###)?

What is the Balance of the GR/IR account


(31000000)?
What is the Balance of your AP account
Copyright(30000###)?
2015 Pearson Education, Inc.

14

Copyright 2015 Pearson Education, Inc.

15

Copyright 2015 Pearson Education, Inc.

16